Fishery Sector – 4M2020 Pangasius and Shrimp Exports and 2H Forecast

In 4M2020, Vietnam's seafood exports reached USD 2.23 billion, down 8% YoY due to the negative impact of COVID-19. Exports value plunged when the orders of social distancing and suspension of business were implemented in almost all markets. Exports to the EU, the US, China-Hong Kong, the ASEAN bloc decreased by 34%, 2%, 11% and 9%, respectively, over the same period in 2019. Only the Japanese market posted a positive growth of 5% as this country only implemented social distancing for a short time. Preliminary statistics of the Vietnamese Ministry of Industry and Trade showed that seafood exports in May reached USD 620 million, down 18% YoY and approximately the value of April.

MWG – 2020 AGM Update

Though the company’s 2020 guidance was rather conservative and lower than our forecast, we maintain our estimates for the year.  Revenue should reach VND 114,595 bn (+12% YoY) while we expect NPAT to stay flat at VND 3,929 bn (+2% YoY). Despite the flattish NPAT growth, we expect MWG to issue approximately 2% of total shares outstanding as ESOP for 2020 as a result of the new policy. While this new ESOP policy remains controversial, we believe it is necessary to maintain working incentive for employees, following numerous cost-cutting measures to deal with the Covid-19 including management’s salary cuts, as well as to preserve substantial amount of capital for BHX’s expansion.

The stock price is trading at a forward PER of 9.4x, which is relatively attractive considering a forecasted EPS’s 5Y CAGR of 20%. We reiterate our BUY on MWG with a target price of VND 131,000. Coupled with a cash dividend of VND 1,500, the total upside is 50% from the closing price as of June 12^th 2020.

Vietnam recorded a trade surplus May

Vietnam’s trade surplus surprised the market and overshot the forecast of the General Statistics Office (GSO) again. That marked a new high in 5M2020, promising to beat the 2019’s peak of over USD 10 Bn as the busiest season is coming. Vietnam’s exporters still managed to exploit fragmented opportunities caused by disrupted global trade, which empowered Vietnam’s total export to bound back in May. Although how successful will Vietnam’s export be in 2020 highly depends on Western countries’ economic restart. Vietnam’s manufacturers are ready to fulfill overseas orders quickly.

NNC update

We believe that NNC's business objectives in 2020 are still possible to be achieved as Nui Nho could perform better than planned to make up for the Tan Lap mine. However, looking at the long-term prospects, while NNC will only operates the Tan Lap mine after 2021, it is paying dividends from the development investment fund. Therefore, after fully collecting the remaining output from the NNC mine, the company's profit will drop sharply as the gross profit from the Tan Lap mine accounts for less than 20% of the gross profit of 2019. Hence, we do not think NNC can keep up with its current dividend policy by 2021. In addition, the company still has no specific plan for land development at the Nui Nho quarry after closure. Currently, NNC is trading at a PE of 8.8x higher than KSB’s (PE 5.4x) and DHA’s (6.8x).

PPC– Maintaining the current profit level would be enough

Although the output is relatively high in the first five months of the year, the decrease in electricity demand during Tet and the social distancing period make it difficult for participants in the competitive generation market (CGM). Accumulated 5M2020, PPC reached a total output of 2.6 billion kWh, up 27% over the same period last year. Contract output (Qc) reached 2.2 billion kWh, up 22% over the same period.

Seaport Industry Update

Container throughput at Vietnamese seaports in 4M-FY20 diverged strongly

Nationwide total container volume, as per Vinamarine, rose by 11% YoY to 6.7 mn TEUs (import/export container volume +7% YoY, domestic volume +18% YoY), which was mainly driven by the robust growth in terminal groups located in Vung Tau (+19% YoY). We estimate other key import/export container terminal regions posted lackluster performance. Accordingly, Ho Chi Minh City’s volume modestly ticked up by 2% YoY to approximately 2.3 mn TEUs while Hai Phong’s volume declined by 1% YoY to approximately 1.6 mn TEUs.

HDB - 1Q2020 updates – Growth still driven by NII

HDB achieved a moderate earnings growth in 1Q (+13.5% YoY), mainly driven by the impressive expansion of net interest income, while other income streams were somehow limited under unfavorable economic conditions. We note that in 1Q the bank has escalated some reserves for trading & investment securities, operating expense and provision expense in case of worsen virus situation. For 2020, we expect net interest income momentum to remain strong, but service income would be more quite at least until the exclusive bancassurance agreement is finalized. We also expect that the bank’s relatively prudent provisioning in 1Q would be able to moderate the virus impact on bottom line in the subsequent quarters. We forecast 2020E earnings growth at 16.4% YoY, giving an EPS 2020f of VND 4,293.

Our target price on the lastest Result Update report for HDB is VND 29,000, equivalent to a potential upside of 6% versus current market price. We note that 2Q business results is likely to reflect the negative impact of Covid-19 more clearly, representing a window for investors to ACCUMULATE the stock.

DRC – Update on 1Q2020

DRC's results in 1Q were quite positive thanks to the better performance of the radial segment compared to the same period last year. That partly eliminated the decline of the bias segment. However, we think that Covid-19 will negatively affect DRC’s exports to the US and Brazil. Therefore, both revenue and profit of DRC will go down in 2Q2020. As a result, we do not think 2Q2020 is a good time to invest on DRC.

We have a target price of VND 21,400/share combined with cash dividend, that will be 13% higher than the closing price on 05/06/2020. We recommend an ACCUMULATE for this stock.

PC1 AGM Update – Energy to be the core business

At its 2020 annual general meeting, PC1 has announced its 2020 guidance and its long-term strategy. We think the most important point is that the company is transforming itself into a power company, as electricity business will be the main contributor to PC1’s profit. In the next five years, PC1’s pipeline includes 144 MW in wind power capacity, 100 MW in solar power capacity and approximately 60 MW in hydropower capacity. Accordingly, PC1’s power capacity will total 325 MW. Then, while construction’s profit margin is significantly lower than that of electricity and real estate cannot provide consistent annual income, PC1’s power plant portfolio will dominate PC1’s financials.

DXG update: Awaiting for Gem Sky World’s launch

Dat Xanh (HSX: DXG) sets total revenue and profit targets in 2020 of VND4.9tn (-16% YoY) and VND1.0tn (-15% YoY), respectively. Management has a prudent view due to the impact of the Covid-19 being highly unpredictable. Generally, this profit guidance is in line with our forecast, with revenue and NPAT-MI of VND5.5tn and VND1.0tn.

FRT - Annual General Meeting Update

After a rough 2019, FRT is expected to have a tougher 2020 before recovering from 2021 on. The covid-19 pandemic is impacting consumer spending and retailing footfall. The saturated smartphone market will further hurt FPT Shop sales. Meanwhile, bad-debt of F-Friend and F-Subsidy is still a concern and FRT will need to write of VND 15bn more in 2020. On the other hand, Long Chau Pharmacy is still in an expansion phase but as yet to contribute to profits

IMP – 2020’s bidding result YTD and a quick review on other competitors in tier 1 & 2 drug bid

For IMP, business prospects come mainly from the ETC channel (hospitals), considering that the OTC channel (pharmacies) is stacked with competition and is not a huge market either (only 25% of total drug sales in Vietnam). On the other hand, ETC channel offers a lot of potential for EU-GMP standard manufacturers to replace foreign medicines in the Tier 1 and 2 bid. Policy wise, Circular 15/2019 was really a big catalyst for the like of IMP