Impacts of Covid-19 on Logistics Firms

Covid-19 epidemic has dampened cargo transport activities in 2M 2020. Accordingly, freight volume has significantly slowed down compared to the same period last year. 2M 2020 freight transport reached 297.3 million tons, up 6.1% YoY (the same period in 2019 increased by 8.7%) while freight rotation reached 56.6 billion tonne kilometers, increased by 4.3% (the same period in 2019 increased by 6.4%).

China and the coronavirus

Interestingly the MSCI China Index has outperformed the MSCI World Index by 8.6% in the past two weeks. China has been outperforming because there is a growing sense that it has seen the worst of the coronavirus.

Implication of Lower Crude Oil Prices for Vietnam’s Economy

Crude oil prices crashed by over 30% last Friday because of disagreements between OPEC and Russia on cuts in production. There are many episodes of plummeting oil prices in the last 50 years due to multiple causes. This short note focuses on the driver of the recent drop in crude oil prices and its implications for Vietnam’s economy which is a net importing country as net spending reached nearly USD 1.8 Bn on purchasing offshore crude oil in 2019.

SMC - 2019 update

SMC’s financial performance was fine due to decreasing steel prices. The company’s ROE was 7.3%, higher than NKG’s (1.6%) and HSG’s (6.6%). SMC’s operating performance was better as its selling volume grew 16%. However, its net income decreased by 43% to VND 97 billion, of which VND 80 billion in net income came from its core business, while the remaining was the profit from selling 65% of its ownership in Ha Noi Coil Center.

TDM- AGM Update

fter TDM's AGM, we have pointed out the main points in the company’s 2019 performance and 2020 plan below

OPEC and its allies deal cut

In its latest meeting, OPEC+ could not reach an agreement on output as Saudi Arabia and Russia once again disagreed with each other’s production targets. While Saudi Arabia expects a major cut – up to 1.5 million barrels/day from the current 1.2 million barrels/day, Russia wants to maintain its current production level.

ANV – Update on 2019 results and 2020 forecast

In 2019, export prices have dropped sharply but good volume  growth into China and ASEAN kept the growth momentum for the company's revenue and profit. ANV recorded net revenue and profit before tax of VND 4,481 billion and VND 831 billion, respectively, increasing 8.8% YoY and 20.4% YoY, respectively. Adjusted for provision reversals in 2018 and abnormal profits from asset liquidation in 2019, PBT from core operation in 2019 reached VND 809 billion, up 25.4% YoY.

IMP – 2019’s bidding results and prospects for 2020

MP’s story in the coming years will be the ETC channel and the EU-GMP plants. We forecast when the three EU-GMP plants run at designed capacities (in 2023 according to our forecast), they will contribute around VND 2,000 bn in revenue while the two old WHO-GMP plants will contribute VND 800 bn (unchanged).

IMP’s stock has increased 10% since our BUY call in Dec/2019. For now we have an ACCUMULATE recommendation with an expected return of 18%. Target price in 2020 is VND 67,000/share.

DPM - Result Update Report

We have an ACCUMULATE with a target price of VND13,600 per share, based on the FCFF and P/E method. Including the VND1,000 cash dividend, we arrive at a total return of 17.7%, based on the closing price on March 03^rd, 2020.

NKG - 2019 updates

NKG’s financial and operating performance did not improve in 2019 as net income dropped by 17.5% to just VND 47 billion and total selling volume decreased by 9%. Especially, net income was supported by pre-tax profits of VND 254 billion from selling fixed assets and financial investments.

NKG’s 2020 preliminary plans are ambitious compared to what it achieved in 2019 as net income target is 326% higher than net income in the previous year while selling volume target is just 11% higher. Besides, for 2020, NKG’s management expects that HRC prices will vary between USD 480-500/ton and gross margin will increase to 6.0% from 2.8% (2019). We expect that in Q1/2020, NKG can benefit from its low-price HRC inventory, which was bought in November 2019 at USD 420-430/ton.

TCB – Update on 2019 Business Performance

Without any one-off income, TCB still achieved a desirable earnings growth of 20% YoY in 2019 (core growth should be 31% YoY). The bank was able to maintain solid credit growth with an active approach in combining customer lending and corporate bonds to fit available credit room, along with a NIM expansion thanks to funding cost saving. Besides, high operating efficiency and easing provision have supported earnings retention. We estimate that an earnings growth of at least 20% YoY should be achievable in 2020.

Mr. Quoc Anh – the current CEO is going to leave in Sep 2020. The bank has been preparing for the transition by delegating each Division Head to make their own decision on daily operations since late 2019. As per the bank, the “Customer Centric” strategy will be retained as its strategic focus.

We maintain our target price at 28,000 VND/share, 25% higher than the closing market price in 28^th Feb (VND 22,250/share), thereby reiterating a BUY rating on the stock.

KSB updates

Opinion: We believe that KSB's earning in 2020 will be slightly affected by the decline from the contribution of Tan Dong Hiep mine due to the inventory from this field and the higher contribution from Dat Cuoc’s industrial park. However, in the long term, from 2021, revenue and profit from Tan Dong Hiep will decrease significantly. Therefore, the long-term prospect of the company will be determined by the possibility of M&A in the same industry. By contrast, debt will put pressure on cash flow in the short term. KSB's current share price is VND 19,150 per share, a 25% decrease compared to the end of 2018. The 12-month trailing PE is 3.6x, around its PE of 2013. We believe that this currently reflects the decline in profits from the Tan Dong Hiep mine, but it does not reflect business expectations in case of a successful M&A deal.