MWG 2020 AM Note

• MWG maintained an encouraging growth rate despite the pandemic in 2020 with revenue and NPAT up by 6% YoY and 2% YoY respectively, completing 100% of our full-year forecasts.
• Jan 2021 Revenue and NPAT contracted by -12% YoY and -11% YoY, respectively, due to different Tet timing in last year and negative impacts from the recent COVID-19 outbreak in Hai Duong in late Jan 2021.
• 2M-2021 revenue, which excludes the effect of different Tet timing between the two years, grew by 5% YoY to VND 21.5 Tn (TGDD+DMX’s -2% YoY, BHX’s +50% YoY).
• Despite the recent Covid outbreak, MWG maintains financial guidance for 2021: Revenue VND 125 Tn (+15% YoY), NPAT VND 4.75 Tn (+21% YoY).
• We are pending reviews on the 2021 forecast – Revenue: VND 146.3 Tn (+35% YoY) and NPAT: VND 5.4 Tn (+37% YoY) - and target price for MWG. The current TP is VND 155,000.

NVL – Financial Gains From Subsidiaries Divestments and Project Revaluation Boosted 2020 Results

• Divestments of subsidiaries and project revaluation were key factors to help NVL surpass its 2020 NPAT plan
• Improved sales performance on a quarterly basis regardless of Covid-19
• Legal bottleneck is being solved step-by-step

Vaccination progress brings hope for the global recovery

• Rapid vaccination campaign brings hope for global recovery.
• Vietnam has joined the mass vaccination with ambitious goals.
• It will be a long road ahead to pre-pandemic life.

DPM – 2021: Rising oil prices to be the largest headwind

The outstanding 2020 performance was a result of the tumble in natural gas prices, causing a sharp decline in input costs. Such results were in line with our forecast. Looking into 2021, rise in fertilizer prices may not be large enough to offset the strong increase in natural gas costs, which are driven by a surge in oil prices. Some sales have been delayed from 4Q2020 into 1Q2021 to take advantage of high fertilizer selling prices. We remain cautious on DPM’s 2021 outlook as mentioned in our latest report. In the long-term, we maintain our view that DPM has not much growth potential. Instead, it is merely a dividend payer with cash dividend stable at VND 700-1,000/share, equivalent to a dividend yield of 4%-5.8% at the current stock price. Thus, we keep our target price for DPM at VND 17,100/share. We expect a cash dividend of VND 1,000/share in the next 12 months. The total return is 5%, based on the closing price of February 24^th, 2021. We have a NEUTRAL view on this stock.

Are Equities Over-Valued?

• Yes, according to the ‘Buffett Indicator’.
• Maybe not if we consider low bond yields globally, even though they have been rising.
• Mainly depends on tolerance for volatility.

HND – Outperformed because of one-off profit

Because of La Nina's potential impact on thermal power plants in 2021 in general, our most recent target price for this stock was VND 17,900 with the combination of PE, FCFF and EV/EBITDA method with weight ratios of 40%, 40% and 20%, respectively. This low target price compared to the market price due to the PE multiple (7x) we use is relatively low compared to the current Index valuation. Moreover, we use a high weight in the PE valuation, reflecting HND’s negative outlook in 2021 because of La Nina. However, we will update our new TP in a later report to determine investment opportunities for a longer-term horizon.

Banking sector – Update on credit market share

• The credit market has seen changes in the last five years. Some of those are expected to be sustained in the future.
• Most of the state-owned banks underperformed sector in the last five years regarding credit expansion. Private banks sustained high credit growth, and diversified into corporate bonds when loan demand weakened. However, this does not reflect a change in risk appetite yet.
• The gap between private banks and state-owned banks will keep narrow, but the pace will slow down due to improved capital. The ranking of private banks regarding credit share is expected to change.
• Based on GDP growth, we project a double-digit credit growth in the upcoming years. For 2021, the forward growth is 13.1% on average. Therefore, we look forward to large private banks outperforming due to strong buffers. Given the uncertainty of the economic recovery, as well as the pandemic development, we maintain our positive view on TCB, VCB, and ACB.

GE2 – Is it an actionable valuation?

On February 9^th, 2021, Power Generation Corporation 2 JSC (ticker GE2) held the IPO of the parent company, selling 581,455,740 shares, equivalent to a 49% ownership. GE2 successfully sold 262,500 shares, equivalent to 0.045% of the total number of shares offered. The starting price was 24,520 VND per share and the average successful auction price was 24,578 VND per share. Although we do not have a finalized target price and recommendation, we believe that GE2's valuation is not too attractive compared to listed power generation companies. This observation holds true for direct comparisons with power plants that are subsidiaries of GE2, with other listed power plants, with renewable energy companies and with investment companies that have portfolios in this industry.

US equities: Valuation

According to the latest Shiller Cyclically Adjusted Price Earnings Ratio (CAPE), the US equity market is getting into ‘overheated’ territory. The CAPE now stands at 34.4, its highest level since late 1999 (Figure 1).  This is more than double the mean level of 16.8 calculated from data looking back to 1880 (Table 1).

Be mindful about the return of inflation

• Surging global commodity prices could lead to reflation.
• Vietnam’s inflation remained subdued but it might not stay muted in 2021.
• Vietnamese policymakers are still wary about allowing inflation to rise.

Growth opportunities for "professional" rice companies

The export volume is not expected to grow much and the selling price will decrease due to competition. As a result, export turnover will decline in 2021. However, there are opportunities in the niche market – high-quality rice exports to the EU, the UK and South Korea, creating a growth motivation for “professional” rice producers such as LTG, TAR and NSC.

STK – 2020: Recycled Yarn Boosted Performance

The 2020 performance was much better than our forecast because of the strong growth in sales of recycled yarn in 4Q, which led to its share in total sales rising to 45%, versus 40% in our assumptions. This, once again, confirm the efficiency of the strategy of focusing on recycled yarn. Thus, we revise up our target price for STK from VND 22,700/share to VND 28,200/share, as we think the high growth potential of recycled yarn will continue in the coming years. With an expected cash dividend of VND 1,500/share in the next 12 months, the total return is 13%, based on the closing price of February 3^rd, 2021. We recommend to ACCUMULATE this stock.