Currencies: Pressure on the Euro

We retain our target of 1.24 for the EURUSD but in the next few months it could be challenging for the Euro. After failing to break the 1.20 level (Figure 2), the pair is now down below 1.18. Meanwhile Norway’s Government Pension Fund (GPFG) is getting prompted from its minority government to shift more assets into the United States and Canada, while slashing its holdings in Europe. That means in the next few months it should be supportive for the USD and CAD. We believe this move is motivated by the fact that GPFG sees better growth potential in North America than Europe. We agree.

HOSE indices review

The Ho Chi Minh City Stock Exchange will review the VN30, VNDiamond and VNFinlead indices in October. Results will be announced on October 19^th  and all changes will be implemented on November 2nd.

VNDiamond index will review its components in October. Based on data as of September 30, 2020, we predict that DXG sill be deleted because it could not meet FOL requirement. We also estimate that the FUEVFVND ETF would need to buy more TCB (+2.6 mn shares), KDH (+0.8), GMD (+0.6), etc. Meanwhile, it would sell all the DXG share (-6.7 mn shares), followed by MBB (-1.5), CTG (-0.8), etc.

The VN30 and VNFin Lead Index will not change constituents in the October review. We also estimate that VN30 ETF would likely to buy more EIB (+4,1 mn share), ROS (+3.0), VIC (+0.3), VHM (+0.26), VRE (+0.2). Meanwhile, it could sell VNM (-0.4), HPG (-0.25), etc. Regarding the FUESSVFL ETF, it could sell CTG (-2.0 mn shares), MBB (-1.16), STB (-0.82) and buy EIB (+2.7), HDB (+0.56), SSI (+0.47).

TCM 9M2020 – Recovering more quickly than the sector

The company’s business is recovering more quickly than our expectations. Sales of fabric have showed signs of benefiting from the EVFTA. That together with the investments in dying and knitting/weaving will be the key to maintain the growth momentum post-pandemic. Therefore, we revise up TCM’s target price from VND 24,000/share to VND 26,100/share. With a cash dividend of VND 500/share in the next 12 months, the total return is 14% based on the closing price of Sep 30, 2020. We recommend to ACCUMULATE this stock.

US: Upcoming November elections

Tuesday night was the first Presidential debate going into the November elections.

Key points:

How does the Presidential election works?

Complicated to start with. Every US Presidential election revolves around this simple question: are you better off now than you were four years ago? For Wall Street and the hedge fund community the current answer is yes. The S&P 500 is just shy of its all-time high. For people that rely on weekly pay checks and have no investments in the stock market, the answer is  probably no.

Real estate update in “Thu Duc City”

Overview

“Thu Duc City” is a hot keyword lately given the merger information of Districts 2, 9 and Thu Duc. According to the information from the Party Committee of Ho Chi Minh City, the Government announced the determination of the Standing Deputy Prime Minister - Mr. Truong Hoa Binh on the project to sustain Ho Chi Minh City’s development. At that time, he gave the green light to the idea of merging the three Districts to form Thu Duc City. This was pursuant to the scheme of arranging administrative units at district and commune levels during 2019-2021. The formation of Thu Duc City in consonance with the orientation of establishing a creative and highly interactive urban area is aligned with the general policy of digital economic development. As these districts already have convenient and modern infrastructure, including the metro line No 1 from Ben Thanh in District 1 to Suoi Tien in District 9, the expressway from HCM City to Dong Nai Province and Cat Lai Port, Thu Duc City is predicted to be new imperative area of HCMC and the country with 30 percent contribution to the city’s economic growth, and 4-5 percent of the country.

GEG: Hydropower bounces back while solar-power contributes to stable revenue

Hydropower experienced an extremely low quantity in 1H2020 but is going to bound back in 3Q and 4Q  because of La Nina

Hydropower’s contribution to GEG in 1Q and 2Q was relatively lower compared to previous years: 25 million kWh and 27 million kWh, respectively. This is only 21% total of the target quantity or 10% total of target revenue for 2020. Consequently, the gross profit margin from this segment experienced a downward trend from 2018 to 1H 2020 because of El Nino.

Did Vietnam grabbed investment opportunities from the production shift out of China?

The COVID-19 pandemic has resulted in a slowdown in foreign capital into Vietnam

Despite the country being a beneficiary from the US-China trade war, foreign direct investment (FDI) into Vietnam has been under pressure this year as a result of the COVID-19 pandemic. In the first nine months of 2020, foreign investors committed US$21.2bn to Vietnam, a 19.0% decrease compared to the same period of last year. At the same time, foreign invested-firms disbursed US$13.8bn, a 3.2% decrease over the previous year. These figures contrast to an increase of 6.7% for implemented FDI and 7.2% for registered FDI in 2019.

CTI update

CTI would likely to complete its 2020 profit plan of VND 112 bn, but it will depend on whether they can complete the extended route 319 and interchange of HCMC – Long Thanh – Dau Giay project at the end of 2020. We think that revenue in 2021 could increase sharply as most of their projects could start booking revenue in 2021 such as the extended route 319 and interchange of HCMC – Long Thanh – Dau Giay.

Steel production and consumption in 8M2020 – Visible recovery

The total consumption in the Vietnamese steel market has been lower during the first eight months of 2020 compared to the same period last year, but monthly figures have showed improvement.

SCS - 8M-2020 Update & Q3-2020 Business Result Estimation: The Recovery Process Is Clearer

We noticed positive signals in the first two months of Q3-2020 when SCS's international cargo volume in July and August diminished by 9.3% YoY compared to a decline of 27% YoY in Q2-2020. In August 2020 exclusively, international cargo volume has returned to the level in 2019, with 13.4 thousand tons of cargo, a slight increase of 0.7% YoY. In the first 8 months of FY2020, SCS has completed 69.2% of the full-year volume plan (completing 67.7% of the international volume plan, 73.9% of the domestic volume plan), which is better than our previous expectations

NLG: The handover of Novia and Waterpoint units are expected to drive Q3 results

We met with NLG’s representatives to update on their current projects progress and earnings outlook in 2020 – 2021. Per our observation and Nam Long sharing, the residential real estate market is still active in affordable housing segment given the strong booking of customers in launching events of NLG and other developers while trading activities in secondary market is still tough amid the low liquidity in short term.

From NLG’s projects update, we believe 2021 – 2022 will be strong profit-recorded period. The catalysts include (1) Strong pre-sale and handover by launching of 7 projects, (2) Recovery of residential real estate market in 2021 thanks to Vietnam success in containing Covid-19, (3) NLG’s lank banks in tier-two cities having potential infrastructure development. However, we still concern prolonged project development from lengthened legal process. For 2020, we estimate NLG’s revenue and NPAT- MI will be VND 2,011 Bn (-21% YoY) and VND 811 Bn (-16% YoY), respectively. Therefore, we suggest to ACCUMULATE NLG with one-year target price of VND29,834, implying an upside of 7% versus the closing price on September 21^th 2020.