VPB – Update on 3Q2019 Business Performance

VPB has reported its consolidated PBT of approximately VND 7.2 Tn (USD 310 Mn, +17.4% YoY), fulfilling 76% of its guidance for the entire year. It mostly came from the recovery of consumer lending as well as the high growth of services income. We estimated that the parent bank’s PBT decreased by 3.6% YoY to VND 3.5 Tn (USD 151 Mn) while that of FC’s PBT was up by more than 52% YoY to VND 3.7 Tn (USD 159 Mn). In 9M 2019, the parent bank contributed 51.5% and FC made up 48.5% of VPB’s total PBT.

VSC - 9M 2019 Business Results Update

VSC’ net profit dropped 33% YoY in 9M 2019. This decrease was attributable to contracted profit margins and one-off items relating to income tax expenses, such as a provision of VND26bn for underpaid tax expenses in previous years of a subsidiary named Green Logistics in 2Q 2019 and other losses of VND 14bn in 1Q 2019.

Update on Brexit

Europe agrees to postpone Brexit to January 31^st 2020, at the latest. The 27 members have allowed for a delay for the exit of Great-Britain from the European Union.

After first hesitating, Europeans finally agreed for a compromise to delay Brexit by three months. French President Macron was the main obstacle to the delay but he finally acquiesced to the pressure from other European leaders. However it remains to be seen if Mr. Johnson will be able to have the British parliament a law approving this delay.

DGW – Q3 2019 Business Result

DGW is having high growths across all the core segments and the ~30% increase in stock price YTD also reflects this. Still, the stock is trading at 12M trailing P/E of 7.5x, which is very low compared to its forecasted EPS growth in this year of around 40%. We believe this comes from investors’ concern about the sustainability of the growth: laptops don’t have much potential left and the smartphone segment is heavily dependent on Xiaomi while consumer goods is still insignificant sizewise and faces fierce competition. Though, the office equipment segment has high potential from the digital transformation trend and Xiaomi’s smartphones are penetrating well into Vietnam. Therefore, we have a positive view on DGW for short-term prospect.

Diverged Deposit Rates in Vietnam’s Banking System

Mid- and small-cap commercial banks have been setting higher long-term deposit rates applied to normal deposits or certificates of deposit for the last twelve months. Familiar names, including Sai Gon Bank, VietCapital Bank, NamABank, CBBank and VietABank are among them. In general, most of them are small-cap and are under pressure to raise long-term deposits to fulfill the requirement of State Bank of Vietnam (SBV).

VIB – Updates on 3Q2019 Business Performance

VIB’s significant 9-month income growth of 40% YoY is due to tremendous credit expansion (+26.5% YTD) and bancassurance income (+372% YoY) – both are very high compared to the industry average. Operating expenses and provision expenses are well-controlled, allowing the bank to achieve nearly 70% YoY earning growth in 9M2019. We like VIB's sales competence and operation improvement as it maintains its focus on retail banking. With this positive financial performance, we expect VIB to maintain its position as the highest 2019 core earnings growth amongst our watch list.

SCS 3Q 2019 Business Results Update

SCS’ 3Q 2019 results showed a significant deceleration with the growth rate of revenue and net income were 8% YoY and 12% YoY, respectively. For 9M 2019, NPATMI’s growth rate were only 14% YoY, which is much lower compared to NPATMI’s 3Y CAGR in the period 2015-2018 was 45%. The slowdown was mainly attributable to the deceleration in international cargo volume.

PNJ – Q3 2019 Business Result

The recovery in Q3, especially in September, looks promising. Demand for jewelries is picking up and the ERP issue was also completely solved. We expect PNJ to have a good Q4 even though it will be challenging to match the 23% net profit target growth. The stock is trading at a trailing P/E of 17x, which is not cheap given our forecasted EPS growth for this year of around 20%. That being said, potential upside would come from expected earnings growth in the following years which we believe will be plentiful considering the current extremely fragmented jewelries market and PNJ being the undisputed market leader. Potential inclusion in the VN diamond-index could also be a catalyst for the stock. Hence, we keep our BUY recommendation on PNJ, with a target price for the next 12 months of VND 105,000/share, indicating 30% upside from current market price.

STK – 9M 2019 Business Results Update

Although virgin yarn products are facing difficulties due to negative impacts of the US-China trade war, we appreciate that STK has increased its recycled yarn orders in order to improve profit margins. In the near future, we believe that it will maintain a possitive growth momentum in recycled orders thanks to (1) increasing trends of sustanability in apparel industry, (2) easy conversion from virgin yarns to recycled yarns if number of recycled orders surge. For 2019, we maintain our BUY recommendation for STK at the target price of VND 24,000 per share.

EVFTA – Export taxes reduction can boost shrimp export to EU largely

The EU-Vietnam Free Trade Agreement (EVFTA), expected to take effect in mid-2020, will be an important catalyst for the growth of Vietnam's shrimp (mainly raw shrimp) exports in the upcoming years.

TCM – 9M2019 Business Results Update

Overall, Rong Viet Securities considers to revise the target price of TCM in the next issue report compared to the previous target price of VND 28,000 per share, due to concerns about (1) unfavourable market condition of cotton yarn segment, (2) unclear expansion of its factories in the short run as its factories already ran at full capacity, (3) the risks of bad debts from these two large customers as the firm has yet to find out alternative orders, (4) the plan to relocate its factory from Tan Binh Industrial Zone to Vinh Long province in the medium term makes us concerned about the reduction of labor productivity. The company is most likely to have to recruit its labor forces here compared to the stable, skilled workforce in HCMC.

DXG – Brokerage segment to drive business

We recently had a meeting with the management of the company and the following are the key takeaways:

• DXG posted 9M’s revenue and net profit of VND 3,798 billion (+17% YoY) and VND 907 billion (+21% YoY), respectively. During the period, net profit was driven by the divestment of a residential project in Nha Trang city (VND 220 billion) and the growth of DXG’s brokerage and secondary investment businesses.
• For 2019, DXG set a profit guidance of VND 1,200 billion (+2% YoY). As updated by management, the company will exceeded this profit target by 8%, reaching VND 1,300 billion (+10% YoY).
• Real estate development plan: DXG plans to launch 8 residential projects to the market in 2020, of which Gem Riverside and Long Thanh township are notable ones.
• DXS, its brokerage and secondary investment businesses, plans to IPO in 2H 2020. After the IPO, DXG will hold a 70% stake in it.