Solutions to solve difficulties for Vietnam’s seaborne shipping industry

In September, the Prime Minister will preside over the conference on developing sea shipping and coastal transport. We expect the Government to have clearer guidelines to implement solutions to solve difficulties for this sector. Among solutions, we believe that CIT incentives to 10% over 15 years will directly and quickly impact the profit-making liners. Since then, these businesses can improve retained earnings to reinvest, modernize their fleets and improve competitiveness with foreign shipping lines. In contrast, some players who still have high accumulated losses will not benefit immediately from the CIT incentives. However, the remaining solutions will also create a more favorable long-term business environment for these shippers.

FED lowers benchmark rate by 25 bps to 2.00-2.25%

The take-away from Wednesday’s decision : expected. The FOMC cited « implications of global developments for the economic outlook as well as muted inflation pressures ». The committee called the current state of growth as « moderate » and the labor market « strong ». The FED said it remains open to further rate cuts if conditions necessitate it.

NTL – 1H 2019 Business Results Update

Recently, we met with management representatives of Nam Tu Liem (HSX: NTL). Since the beginning of 2018, the stock price has rocketed thanks to the improvement of business results due to a more aggressive strategy, leading to higher profit recognition and project monetization. In 1H 2019, revenue and NPAT-MI were VND 453 billion (+566% YoY) and VND 120 billion (+566% YoY) respectively, fulfilling 56% of revenue guidance and 51% of NPAT guidance for 2019. The good performance was due to the contribution of two key projects, namely Lideco Ha Long high-rise and North-Route 32 projects.

STK – 6M 2019 Business Results

In summary, STK's core business is affected by the impact of the trade war, causing revenue to decline compared to market expectations. However, we believe that the increase in the proportion of recycled yarn to net revenue will be a catalyst to improve its profit margin and revenue. Rong Viet Securities is reviewing the company’s financial status and will update its valuation. We will publish an updated report shortly.

US Economic Data Prior to the FED’s Policy Meeting

Last week, US officials released the country’s annual GDP growth for the second quarter which was estimated at 2.1%. The increase in real GDP in the second quarter reflected positive contribution from personal consumption expenditures (PCE), federal government spending, and state and local government spending. Those were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment and residential fixed investment.

MBB – 1H 2019 Updates – NIM and Credit Expanded Strongly

MBB’s earning growth in 1H 2019 is positive with the strong expansion of interest income and service income’s. Though the trend of impaired loan formation is increasing, this high earning growth allows the bank to write off debts early and maintain a healthy book.

The management has announced the plan to issue 7.5% capital to foreign investors within this year (by issuing 123mn new shares and selling 38.9mn treasury stocks). If the plan is successful, the bank is likely to acquire at least 4Tn and will get sufficient capital buffers for comfortable growth in several years. This can be another catalyst for the stock price in short-term.

MBB is currently trading at VND 22,350, equivalent to an attractive PBR 2019f of 1.2x. We have a BUY rating on the stock with a target price of VND 30,500, about 36% higher than the current market price.

DVP – Bumps ahead

DVP's 2Q2019 NPAT surged 21% YoY mainly driven by unusual timing of JV’s gains recording. Its EBIT declined 5% YoY, however, showed a small reduction in port operation as their box throughput was down 19% YoY. 3Q2019 results are likely to be hit, we estimate a downside of 25% in PBT.

Currently, we arrive at 1Y target price of VND 36,000 (2020F P/E of 7x).

PNJ – 6M 2019 Business Result

Looking at the long-term picture, there is still a lot of room from the jewelry market which is still fragmented and the booming demand for fashion jewelry from the rising middle class  in Vietnam. Although Ho Chi Minh city has begun to slow down and PNJ’s growth is being affected, other provinces, especially in the North, are very potential. It will take time for PNJ to "penetrate" into these markets and change consumer’s habits there. Negative short-term business result is opportunity for long-term investors. We maintain our BUY recommendation on PNJ stock.

TCM – 6M2019 Business Result

For 2019, Rong Viet Securities continued to maintain the target price at VND 25,500 per share, plus with a cash dividend of VND 500 per share, equivalent to the expected return of 0% compared to the closing price on July 23^rd, 2019. Therefore, we recommend NEUTRAL for this stock. It should be noted that this valuation does not include contributions from TC Tower real estate project because we do not have enough information.

PVOil - Update on 2Q2019 preliminary result

The business result of PVOil has so fluctuated after IPO and the company seems to find it hard to control the key points that heavily impact on its core business. But PVOil is seen as big players in the sector, owning a wide gasoline distribution channel. Currently, the share price is being traded at a high P/E ~29x.

FRT – Q2 saw recovery but outlook doesn’t seem promising yet

FRT’s business result in Q2/2019 recovered significantly from the bottom in Q1/2019. Revenue and PBT in Q2 increased by 11% yoy and 17% yoy respectively. Looking at the monthly result, we can see that most of the recovery derived in April when Apple started to support the company through promotional programs, whereas the growths in May and June were not considerable. By the end of June, the company grew 7.5% in revenue and 10% in PBT, achieving 45% and 39% of 2019 target for revenue and PBT respectively, which signals the second half of the year will be full of challenges for the company to complete their target. 

Steel Production and Consumption in 6M2019

In 6M2019, construction value growth slowed down to 7.85% (lower than 9.16% in 2018). This has affected the demand for steel. The domestic steel industry in the first half of the year produced a total of 12.6 million tons of steel, sold 11.6 million tons, of which 2.5 million tons were exported, increasing by 7.7%, 9.8% and 6.3% respectively compared to 1H2018 according to the Vietnam Steel Association.