MWG – Update on 11M-2020 Results

During that period MWG achieved revenue of VND 99.3 Tn (+ 7% YoY). Net profit expanded reaching VND 3.6 Tn (+ 2% YoY). These results are rather in line with our forecast for 2020, completing 92% of our estimates in terms of both revenue (VND 108.4 Tn) and net profit (VND 3.9 Tn).

For 2021, we project that revenue will reach VND 146.3 Tn (+ 35% compared to 2020E) and net profit of VND 5.4 Tn (+ 37% vs. 2020E), corresponding to an EPS (adjusted for ESOP) of VND 11,506. Thus, the 2021F P/E as of December 30, 2020 is 10.2x. We reiterate our BUY recommendation on MWG, with a 12-month target price of 155,000 / share, implying a 2021F P/E of 13.5x and an expected return of 33%.

PC1: Wind power market enhances the performance in 2021

The company estimates that it will gain VND 2,000 billion and VND 70 billion in revenue and NPAT, respectively in the 4^th quarter. As a result, revenue in 2020 is estimated to increase by 6% compared to the previous year. However, NPAT is estimated to increase by roughly 23% compared to 2019. We still keep our target price at VND 29,000 as their growth potential in 2021 based on prosperous outcomes of the hydropower segment and a booming wind power market. Wind power will not only contribute to the power construction segment but also the three wind power projects are expected to COD which will contribute to the power manufacture one. However, the real estate segment in 2021 maybe experience an off-peak year incase PC1 does not attempt to hand over the 1^st phase of the Thang Long project.

Shrimp Sector – Growth Prospects are still Bright in 2021

Vietnam shrimp export increased by 11.3% YoY in 11M2020 as a result of the country’s strict control of the pandemic compared to competitors. Although consumption of the foodservice channel dramatically declined due to social distancing orders, consumption of the retail channel has risen largely due to the rise of home cooking. Vietnam has and will continue to benefit from this new trend due to its higher level of processing skill versus competitors. Looking into 2021, we are optimistic about the industry’s growth prospect as shrimp volume is expected to recover more than its two main competitors, India and Ecuador. Tariff incentives in the largest market, the EU, will also be a boost. Competition with Ecuador will rise as this country is increasing its market share in the US and the EU to reduce dependence on China.

The implications of the currency manipulation designation

In its semi-annual foreign exchange rate report issued 16 Dec 2020, the US Treasury labelled Vietnam as a currency manipulator. To be specific, the US Treasury found that Vietnam met all three criteria under the 2015 Act over the four quarters through Jun 2020, including: (1) US$20 billion threshold for bilateral trade surplus with the US; (2) 2% of GDP threshold for current account surplus; and (3) 2% of GDP threshold for net purchases of foreign currency. Not surprisingly, we already warned investors that this is a potential risk for Vietnam. In this update, we will discuss about what will happen next and possible scenarios regarding to this event.

CTG – Retrogression and hope of a return

CTG is among the largest bank in Vietnam in terms of total assets, credit and deposit. The bank has a wide network and ranks third in number of branches and transaction offices in the country. With a prestigious brand name, which is among the top 300 of global bank brands, the recent performance of CTG is not up to expectations. This state-owned bank has faced difficulties regarding capital constraint and non-performing assets, and has for many years experienced lower growth than the industry. CTG lost the most credit and deposit market share among listed banks in the past three years. The epidemic, affecting loan demand and asset quality, worsened the gap between state-owned banks and private ones. We expect that capital raising through a private placement will soon take place to enhance the capital adequacy ratio, in which the government will make an additional investment to retain its ownership at 65%. However, timing and size of the deal is challenging to predict. A better capital buffer and a healthier balance sheet would give room for credit growth and thus improve the medium and long term outlook.

Steel consumption recovered strongly in November

Steel consumption has recovered strongly in November after falling in October. The demand for house and factory repairs after the stormy period, and the favorable weather for construction activities supported sales in all three main steel segments. In addition, due to increasing steel prices, retailers tended to store more products in the short-term. In fact, HRC prices increased from USD 530/ton in early November to reach USD 700/ton. Meanwhile, construction steel prices were predicted to increase due to higher marterial prices. In the construction steel segment, the selling volume was supported by the domestic market as domestic sales in November increased by 61% MoM and 9% YoY. Similarly, steel pipe consumption was still high owing to strong domestic demand. In the coated steel segment, export volume was still high due to the strong demand from the EU. Several coated steel manufacturers have sufficient export orders for production until March 2021. For December, we believe coated steel consumption can be still good due to high exports, meanwhile, construction steel and steel pipe demand could decrease slightly compared to November.

REE – Recovering steadily

We have revised up our target price for REE because of its stable improvement during the year despite having been directly affected by COVID-19. The new target price is VND 54,000, equivalent to an upside of 19% compared to the closing price on December 18^th. The most important reason to accumulate and hold this stock is the persistent cash flow from the office leasing segment, especially the stability despite the impact of COVID-19. This is the premise for REE to continuously invest in public utilities to generate profit growth in the medium to long term. In the near future, although the operation of Thuong Kon Tum Hydropower may have a short-term impact on the profitability of the utility sector, we still believe that REE's public utilities portfolio will achieve stability thanks to its diversity. In the long term, we expect the new e.town 6 office buildings and renewable energy plants to be the growth drivers.

Currency: US Treasury Conclusions Related to Vietnam

Vietnam’s trade surplus continued to expand year-over-year in the first half of 2020, helping push the current account surplus over the four quarters through June 2020 to 4.6% of GDP. Over the same period, Vietnam’s goods trade surplus with the United States reached $58 billion, the fourth largest among the US trading partners.

AGG - Tranformation from a property broker to a real estate developer

An Gia Investment (HOSE: AGG) started as a real estate broker in 2008 before expanding to develop properties in 2014 to capture the surge in housing demand. The company owns a landbank  of 32 ha (~30ha in HCMC, 1.8 ha in Mui Ne), which is quite small compared to other developers. Despite of that, the partnership with Creeds Group (an international real estate developer with investment experience in 30+ projects in 10 Asian countries with a total gross development value of USD 3 billion) helps AGG in funding and development procedures for its projects . From our view, this is much value-added for such a mid-sized developer. On January 9 2020, An Gia was officially listed on HOSE.  In the next five years, the company expects to launch several residential projects in prime locations in Vung Tau, HCMC and neighboring provinces.

Industrial Parks - Demand will increase due to shift in production

We believe that FDI inflows to Vietnam will recover in 2021 when the Covid-19 vaccine is being produced, thereby controlling the disease. At that point investors could accelerate their investment decisions. Moreover, Vietnam has been seen as the ideal destination for companies that want to diversify production outside of China, which will help increase demand for industrial land. It is expected that companies with large land that can be put into use soon such as KBC, VGC in the North and BCM, PHR in the South have many opportunities to take advantage of the coming FDI.

ACV - EGM Approved the Investment Plan for Long Thanh International Airport Third Component Project

As the Government approved ACV to be the main developer of the third component project of the Long Thanh International Airport (LTIA) phase 1 in November 2020, the company held an EGM yesterday to propose the investment plan for the project. Below are the key takeaways from the EGM.