Yarn industry still faces difficulties

Although firms are trying to diversify their export markets, shifting to Thailand, Brazil, Japan, etc. The proportion of export value in these markets is still quite small compared to the scale from China. Therefore in the short run, yarn manufacturing enterprises, especially cotton ones, will continue to face difficulties. However, we expect that when the market recovers, China’s yarn inventories have been released, fabric manufacturers will continue to place orders to maintain production and business activities. At that time, the advantage will be largely reserved for firms that having a large production scale and producing high quality products with limited supply in the market.

MBB – Updates on Parent bank’s Business Performance 3Q2019

MBB’s parent bank achieved a positive growth of 41.2% in TOI and 39.2% YoY in PBT in 3Q2019 (which raised YoY earning growth from 22.5% in 1H2019 to 28.5% in 9M2019). Excluding income transferred from associates, actual earnings growth was 29.6% for 3Q and 23.0% for 9M. This growth was largely driven by income from securities trading and debt recovery instead of net interest or service income. Meanwhile, operating expenses and provision charges continued to rise. Considering moderate growth of the parent bank, we hold the view that consolidated earnings growth will still be driven by the insurance and consumer finance business of associates, though operating and provision burden in 3Q is expected to be pressured.

In Sept, MBB has paid 8% share dividends, as well as announced the plan to issue 43.2mn ESOP shares (2% of charter capital) at face value to its employees in Sept/Oct. The bank is still on plan to issue 141mn primary shares (5.63% of post-money charter capital) and 47mn treasury shares (1.87% of post-money charter capital), by the end of 4Q2019.

MBB is currently trading at VND23,350, equivalent to a PBR 2019f of 1.4x. The stock price is 22.0% lower than our target price of VND28,500. We thereby reiterate our BUY recommendation on the stock.

Total industry was not a big concern in September but needs to be watched closely in October

Vietnam’s economy grew strongly in 3Q. Nine month GDP growth recorded its best reading in nine years. However, PMI data from Markit’s survey and headline industrial production index MOM (IPI) do indicate some slowing industrial activity in September.

But still not a concern

Total industry peaked in July and August. During this period, although mining and quarrying activities continued to decline, total industry still maintained its pace thanks to manufacturing activities. In which, manufacture of computer, electronic and optical products contributed significantly. At the same time, we notice a strong pick up in export of phones and parts in 3Q

3Q 2019 Hai Phong Seaports’ Preliminary Business Results Update

Overall market size remained unchanged, dragged down by lower domestic volume while import/export volume growth stayed positive

According to Hai Phong Maritime Administration, total throughput of Hai Phong in 9M 2019 amounted to 3.6 mn TEU, stayed flat compared to same period last year. However, of which, import/export container volume still experienced a healthy growth of 9% YoY reaching 2.7 mn TEU. In general, market share gainers were PHP and Lach Huyen HICT, while remaining players have seen its volume declined or nearly unchanged.

KDH – Maintaining earnings growth

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

• In 2019, KDH set a profit guidance of VND 1,046 billion (+29% YoY), driven by the hand-over of the Verosa Park project. Looking forward to 2020 and 2021, profit growth is maintained at a high level with the recognition of profits from existing projects such as Jamila, Safira and new projects such as Lovera, Verosa Park or Clarita (to be launched in 2020).
• Real estate development plan: KDH continues to develop its land bank in District 9, HCMC, with the launch of the Verosa Park in 2019 and Clarita projects in 2020. Both projects are low-rise components, located in premium location in the East of HCMC. We believe that these projects will have a high absorption rate.

Update on Vietnam’s G-Bond Market in 9M2019

According to the latest data, the State Treasury of Vietnam (VST) mobilized VND 52.6 trillion via Government bond auctions, equivalent to 70% of the quarterly plan and down 2.5% YoY. The winning/offering ratio was at 90%. In the first nine months of 2019, VST raised VND 155 trillion, only completing 59% of the yearly plan but the winning/offering ratio rose to 80% from 50% in 9M2019.

PHR – On its way to be a “key player” in the industrial park segment

In terms of industrial parks, good positioning coupled with a smooth land clearance process are the main reasons PHR’s IPs operate much effectively than other IPs. Their faster processing plan will allow to lease most of their projects next year.

CASA and Digital Payment Promotion Initiatives

Currently, MBB and VCB are two banks with the highest CASA ratio and lowest funding cost in the sector. However, the competition for CASA will become more intensive because of deeper penetration of private banks. The investment in digital banking and promotion initiatives, on one hand can support CASA ratio, but are also likely to raise operating cost and settlement expense. Therefore, banks will need to have effective investment and competitive strategies to maintain CASA while securing long-term benefits.

3Q 2019 Haiphong Seaports Market Preliminary Review

According to Hai Phong Statistical Office, estimated total cargo throughput in Hai Phong seaports in 9M 2019 reached 90.6 million tons, up 15% YoY. Accordingly, the total revenue of the seaport sector in Hai Phong in 9M 2019 was VND4.11tn (+ 9% YoY).

PVS – No significant contracts impact on the short-term outlook

Despite the negative performance of the stock price due to the lack of new contracts recently, we believe that PVS is still capable of getting new contracts in the future to add to the current backlog. For 2019, we project that revenue and NPATMI will reach VND17,665 bn (+20.7% YoY) and VND 1,103 bn (+5.3% YoY), respectively. The target price for PVS is still maintained at VND 25,080 per share, same as the latest update in our recent oil & gas report

TDH – Plan to develop large-scale land bank

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

• During 1H 2019, net profit was only VND 57 billion (-24% YoY)), driven by financial incomes from its divestment in a residential project. Per management, 2H 2019’s result will be stronger thanks to hand-over of existing real estate projects, namely the Citrine and TDH Riverview.
• In 2019, TDH set a high net profit target of VND 231 billion (+100% YoY). However, we are concerned about the ability to achieve that goal.
• Real estate development plan: Due to prolonged legal situation in Ho Chi Minh City, TDH tries to expand its coverage into neighbor provinces likes Can Tho, Binh Duong, etc. As of their plan, these projects will generate cash flow since 2021 onwards.