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.

Domestic activities continued to strengthen

Domestic activities stayed strong in Nov 2020

On the supply-side, industrial production registered strong growth in Nov 2020 (+3.9% mom and +9.2% yoy), led by a robust growth of the manufacturing sector (+11.9% yoy). Particularly, a 125% surge in refinery petroleum production has contributed significantly to the manufacturing growth figure, mostly due to the shutdown of Nghi Son Refinery & Petrochemical in Nov 2019 for maintenance. Leading indicator – PMI showed that recovery lost a little momentum in Nov 2020, dipped to 49.9 from 51.8 in Oct 2020. However, despite this setback, optimism for the year ahead continued to improve to the highest since Jul 2019 as the COVID-19 pandemic remains under control.

Global Banks

Banks are one of the most sensitive asset classes to economic growth and with over US$110bn set aside by US banks alone for loan losses since the pandemic began, they not only have a huge safety cushion but also potential for these provisions to be reversed. Bank stocks tend to bottom out when revenue expectations run ahead of provisioning costs. The tipping point is when economic data starts to accelerate, deflation fears abate and real interest rates drop into negative territory.

BCG: Real estate will be the major contributor to 2021 earnings

BCG restructured during 2015 – 2018 and improved efficiency in 2019 with four main segments including real estate, renewable energy, industrial and manufacturing, construction and services (Figure 1). In the near term, it will focus on real estate and renewable energy.  

Pangasius Sector – 10M2020 Review and 2021 Prospects

Prolonged sluggish exports with tumbling prices while new Chinese custom inspections are a short-term headwind

After ten months of 2020, pangasius exports came in at USD 1.21 bn, -26% YoY. Of which, volume and price dropped by 9.2% YoY and 17% YoY, respectively, according to the Ministry of Industry and Trade (MoIT). Although markets quickly resumed when governments lifted quarantine orders, export prices have not had a chance to rise as the worry about the possible pandemic outbreak recurrence discouraged buyers to place large orders. Export prices have hit a 5-year low at the end of October.

NKG – Earnings to benefit from favorable material price and the strong demand from the EU in 4Q

NKG’s results are expected to be positive in 4Q owing to the high selling volume and gross margin. NKG will run its factories at full capacity in the next four months due to large export orders to the EU. Therefore, sales will be stable at roughly 200,000 tons in 4Q, which is similar to 3Q. Besides, HRC prices increased continuously to roughly USD 630/ton, thus, NKG’s gross margin will be supported and can vary in a range of 6.5%-7.2% in 4Q. We believe the company’s net income is likely to exceed its target of VND 200 billion. Currently, NKG is trading at VND 14,150, equivalent to a P/E of 11.6x for 2020 and an EPS of VND 1,225.

NTP – Making most out of the situation

NTP has seen contrasting impacts from COVID-19. On the one hand, weak construction demand will cause it to miss out on its 2020’s volume target very likely. It was reported that NTP estimated its 2020 sale volume to hover between 90,000 to 100,000 tons, less than their 104,000-ton target. Its 2020 revenue is going to be 10% lower YoY. On the other hand, PVC reached its historical bottom at USD 740 per ton mid-year (figure 1), 21% lower than the early-2020 level, which gave NTP opportunities to reduce production costs. Indeed, the company has benefited from purchasing a considerable amount of PVC resin, whose price has increased more than 50% since then.