BFC - 2Q2020 result update

BFC's profit in 2Q2020 recorded a strong improvement year-on-year as well as from the previous quarter thanks to (1) a sharp drop in raw material prices (2) lower selling and interest expenses. However, overall sales volume is still low compared to the average level. With the peak consumption season in the second quarter, we believe that the company's output from 3Q2020 will decrease and go sideways compared to the same period in the context of weak NPK demand in the domestic market. Therefore, the bottom line for BFC is no longer as attractive as in 2Q2020.

The drop in raw materials is the only short-term support and BFC is likely to face difficulties in selling activities as the NPK market is very competitive, which could impact the profit of the company. Therefore, we maintain a SELL recommendation on BFC. Buy at a price of VND 10,000 with the expectation of an annual cash dividend of VND 1,000 per share, equivalent to a dividend yield of 10%

QNS – 1H2020 review and 2H2020 outlook

In 1H2020, results were muted due to weak soymilk demand and shortages of sugarcane input. However, we expect all segments to recover in 2H2020 as Covid19 subside. Therefore, given expected healthy operating cash flow while there is no significant CAPEX demand, we believe QNS will maintain a cash dividend rate of 25%-30%, or a 70% payout ratio in the coming years. Accordingly, the target price in 12 months is VND 33,000/share and cash dividend of VND 2,500-3,000/share. Expected upside from August 14^th’s closed price is 17%. We have an ACCUMMULATE recommendation

Activity in EMs recovering slower than in advanced economies

The IHS survey underlined a divergence between emerging market economies (EMs) and advanced economies (AEs) in terms of recovery in the manufacturing sector in the second quarter of 2020. The recovery of the former seemed to lag behind the later due to a high dependence on external demand as well as constrained policy measures in order to address the pandemic. The Bloomberg’s daily activity indicator, a composite of high-frequency data, also showed weak momentum of EMs’ recovery on average. According to the BIS, EMs have been weathering a perfect storm, particularly disruptions to global value chains, collapse in export receipts, plummeting commodity prices and retrenchment in capital inflows.

Industrial parks review: land prices keep rising thanks to strong demand

The US-China trade war, additional public investments and new free trade agreements have driven companies to diversify and relocate into Vietnam’s industrial parks. The country possesses a low-cost labor force, stable government and one of the fastest global growth rates – all appealing features leading to a fertile investment environment. In 2020, this trend is still very strong, creating impressive business results for operators. Rental prices, accordingly, also increased by 10% compared to the end of 2019, helping to cover projects’ development costs. Looking ahead, we believe that the demand for leasing will continue to be high and, as such, it should be a prosperous year for industrial park enterprises. We remain positive on developers that own large and available land banks.

HDB – 1H2020 update – NII predominantly led growth, asset quality stayed manageable

For 2020, we expect net interest income growth to remain strong with positive momentum in both credit and NIM, but service income will remain stable at least until the exclusive bancassurance agreement is finalized. We also expect that the bank will be able to handle the virus impact on asset quality in the subsequent quarters.

Our target price on the latest Result Update report is VND 31,000, equivalent to a potential upside of 17% versus current market price. This translates to an ACCUMULATE recommendation.

NKG – 1H2020: COVID-19 harmed sales, but profitability improved

We believe NKG’s business has become more sustainable as its gross margin of 4.6% in 2Q2020 was acceptable as HRC prices dropped strongly during the COVID-19 outbreak. However, the interest expenses were still significant compared to its net income. We expect the company to balance its net margin and sales properly. Regarding 2H2020, the strong HRC prices can support NKG’s net income in 3Q2020, but there are several threats. A fresh COVID-19 outbreak could have affect Chu Lai steel pipe factory’s progress negatively, and lead to weak demand for coated steel and steel pipes in the domestic market. Meanwhile, HRC prices could decrease in late-2020 due to the weak recovery in the manufacturing segment worldwide. In the long-term, we are waiting for opportunities from the shift of factories to Vietnam

DRC – 2Q2020 Business results update

DRC's business results in 2Q were not good due to Covid-19's impact on radial tire demand, while the bias segment continued to decline due to the trend of replacing those by radial tires. We believe that the epidemic in the US and Brazil will continue to negatively affect DRC's export in the second half of the year. Therefore, the revenue and profit in 2H2020 will decrease compared to the same period last year. We believe that profit will recover in 2021. Therefore, investors can consider accumulating DRC shares for next year.

VFMVSF Fund

Vietnam’s DC25 and HIHL have legal entity as foreign funds. VFMVSF has attracted a large amount of money from foreigners and shows that even in the context of the pandemic, there is some interest for Vietnam's stock market. This is a positive point given the situation that a second outbreaks was announced in Da Nang compared to the continuous net selling activities of foreign investors during the first outbreak.

Shrimp Sector – 1H2020 Review and 2H2020 Prospects

The sector posted positive growth in spite of the pandemic

Export value in 1H2020 reached USD 1.52 bn, 6% higher than 1H2019. Exports to the US surged 29% YoY but to the EU plunged 24% YoY. Exports to Japan increased slightly by 2% YoY and to China-Hongkong came down a little, -3% YoY. According to the Ministry of Industrial and Trade (MoIT), ASP was flat while volume increased 6% YoY in 6M2020.

VSC – Q2-FY20 Business Update: Earnings Trailed Our Forecasts Due To Weaker-Than-Expected Profit Margins Expansion

VSC has reported Q2-FY20 financial results with total revenue of VND393bn, which was down by 17.1% from the last year’s figures while PBT declined by 13.2% YoY to VND74bn. With these results, VSC has completed 51.7% and 58.3% of full-year guidance for revenue and PBT, while corresponding fulfillment rates of our FY20 forecasts stood at 48.9% and 44.1%. Generally speaking, softer-than-expected quarterly profit margins, though did show some improvements on an annual basis as expected, was the main reason why VSC’s recent results missed our forecasts. This level of profit margins was attributable to a significant surge in selling expenses, which presumably indicates a stiffening competition and a fundamental change in the company costs’ structure. Therefore, we cut our FY20/FY21 earnings forecasts by 2.8%/2.6% to VND243bn/VND266bn.

DXG update: Launching of the Gem Sky World project

In 2020, prospects will be brighter, thanks to deploying a newly acquired project, namely the Gem Sky World. The project is considered to be the main profit driver of DXG in 2020-2021. However the brokerage segment’s performance could be suffering during this period due to the effect of Covid-19, causing a slowdown overall for the real estate market. In 2020, as per management, DXG will still maintain its profit target at around VND 1,000 billion, resulting in a forward P/E  of 4.6 times. Our current one-year valuation for DXG is VND 13,500/share, equivalent to a 51% return. We will update the valuation based on the latest update in the next quarter.