PNJ – May’s result update

We maintain our cautious view on PNJ for 2020 as (1) pent-up demand dried up following an impressive recovery in May and (2) we expect consumer spending on jewelry to deteriorate in 2H2020 due to the prolonged impact of Covid-19.

Despite this glooming short-term outlook, PNJ is heavily investing in digital transformation projects, human resources, production capability as well as store networks so as to prepare for the fuller recovery of the demand and to cement its core competitive advantages, while others retailers seem to be barely active. As we expect that those advantages will further solidify PNJ’s undisputed leading position in the jewelry industry which is substantially potential going forward owing to Vietnam’s fast-rising middle class, we are bullish on PNJ;s prospects from 2021 onwards.

For FY2020, we project revenue and NPAT-MI to reach VND 15,470 (-9% YoY) and VND 896 bn (-25% YoY), respectively. For FY2021, we project revenue and NPAT-MI to reach VND 18,547 (+20% YoY) and VND 1,115 bn (+24% YoY), respectively.

PNJ is currently trading at VND 59,000. We reiterate our Buy recommendation with a target price of VND 73,000 (total upside is 23%) , implying a 2020 PER of 19x and a 2021 PER of 15x

HPG update: Waiting for stronger growth

Although the steel industry was hit by the COVID-19, HPG’s net income in 6M2020 increased by 30% YoY and was equivalent to 55.6% of the annual net income target. For the remaining of the year, we believe HPG will meet and even exceed its annual targets to reach our net income forecast of roughly VND 11,000 billion. Firstly, we expect that steel demand will be supported by the recovery after COVID-19 and the strong public investment from late-2020. Secondly, HPG has strong competitive advantages in the steel segment as the company still increased its market share in tough market conditions. Meanwhile, one of its main competitors left the rebar segment and other large manufacturers’ selling volume decreased significantly. Finally, hog prices are still high, and even higher than our expectations due to the low recovery of production volume.

Currently, HPG is trading at VND 27,600, which is higher than our target price of VND 27,300. We will update the valuation in the next steel industry report.

VSH – Operating Thuong Kon Tum, finally!

VSH’s 2019 performance was not good due to the poor hydrology conditions. The problem continued throughout 1Q and 2Q2020 as both Vinh Son and Song Hinh HPP saw output decreasing by 50% YoY. VSH’s output was merely enough for Qc and it only sold 5% of its output on the CGM. VSH expects 3Q2020 to continue to be lower YoY in terms of Vinh Son and Song Hinh HPP’ performance. Thuong Kon Tum HPP is scheduled to start operation in late-August and contribute significantly to VSH’s output but not net income.

DIG update: The Gateway project to drive its earnings in 2020

DIG is a real estate company that owns a large and valuable land bank, focusing mainly in tier-2 cities like Vung Tau, Dong Nai and Vinh Phuc. The company's current valuation is looking quite attractive, with a current P/B of only 0.9 times. However, the short-term growth drivers are not really clear, as delays slow down the implementation of key projects in Dong Nai province. The company has set a profit target VND 520 billion for 2020, resulting in a forward 2020 P/E of 7.2 times. Our current valuation for DIG is VND 17,700/share, equivalent to a 44% return. We will update the valuation based on the latest updates in the next quarter.

MBB – 2020 AGM updates

MBB is likely to undergo a pressure as the plan of restructuring bank loans and MCredit coincides with the Covid-19 situation, which hurts the consolidated bank’s near-term outlook. We think that in 2020 MBB would maintain a low (even negative) earnings growth to prioritize the handling of its current restructuring progress and virus-impacted loans, while trying to build a better position for higher growth since 2021 onwards.

The stock is currently trading at VND 16,900, equivalent to a trailing PB of 1.0x, which is quite low versus peers. However, considering current headwinds, we recommend watching the bank’s performance in the next quarters to see how much the situation could improve. A more detailed analysis will be provided upon the publication of 2Q financial statements.

ACV - AGM note: Timing to reopen international markets remains uncertain. Review of FY20 forecasts pending.

We attended ACV’s 2020 AGM last Friday in which all the proposals submitted were approved owing to the agreement of a distinct majority of shareholders including the Commission for the Management of State Capital at Enterprises (CMSC), representing 95.4% of total shares outstanding. In the AGM, ACV shared a more negative view on the FY20 outlook compared to our previous forecast in May as the second wave of covid-19 hits many key international markets. As such, we are reviewing FY20 financial forecasts as well as the target price (current TP of VND 65,000).

Will Economists Revise Their Forecasts?

The world is broadly reopening as people start losing their tempers with shelter-in-place orders even with non-stop increases in new cases of COVID-19. Economic activities are back to a ‘new normal’ and the market pays heavy attention to the early post-lockdown statistics. Interestingly, more and more preliminary economic data have beaten economists’ forecasts which reflected deeply pessimistic views on the outlook. While manufacturing is slightly below the positive territory, service providers are more optimistic about residents’ potential consumption caused by forced savings and generous stimulus.

Steel Production and Consumption in 5M2020

In 5M2020, the domestic steel consumption and construction industry were hit strongly by COVID-19. The government’s measures to control the pandemic, including travel restriction on people and goods, social distancing, and the disruption in the international supply chain affected negatively steel production and consumption. The construction industry grew at a pace of 4.4% in 3M2020, significantly lower than the pace of 9.2% in 2019. Meanwhile, domestic consumption of construction steel and steel pipes fell by 9.2% and 10.1%, respectively. Noticeably, the domestic consumption of coated steel still grew by 4.5%.

GMD - AGM note: Economy recession concerns cloud FY20 Outlook; Maintain TP

The FY20-21 outlook for GMD remains subdued as 1) the pandemic and its prolonged impacts will drag heavily on the cargo volume throughput, 2) the rise in competition in Hai Phong will likely further squeeze port operations’ profit margins while 3) the loss of Gemalink will be the key factor to follow closely next year.