MBB – 1Q2019 Business Results and 2019 AGM Updates

MBB maintains high growth in net interest income thanks to its consumer finance and insurance subsidiaries. These businesses also drive operating and provision expenses. We expect this trend to continue.

After years of keeping its foreign ownership limit at 20% (maximum 30% by law), we believe MBB may unlock the remaining 10% foreign room for the private placement as planned. Management believes overseas investors will pay a higher price than locals (triple or quadruple face value).

MBB is currently trading at VND 21,900, 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 39% higher than the current market price.

DGW – Update on Q1 Business results

In an effort to diversify away from the saturated ICT industry, DGW set its focus on office equipment and consumer goods. Though the digital transformation and consumer goods market have great potential, DGW will also face fierce competition and the distribution models are quite different from ICT business. Risks: In the phone segment, DGW is heavily dependent on two major suppliers (Xiaomi and Nokia) and the company has a high debt capital structure.

Trade War with the US?

Vietnam and the United States are allies. Since former president Bill Clinton lifted the trade embargo in 1994, relations between the former foes have grown ever warmer, despite or perhaps because of China’s rise as a major regional power.

Alliances however have not deterred the US administration from aggressively pushing the renegotiation of bilateral deals while multilateral deals seem a no-go for Trump. He quickly withdrew from the Trans Pacific Partnership (TPP) upon entering office.

Targeted are those countries with whom the US runs a large trade deficit. Convinced running a trade deficit equals “losing”, the administration has made trade deals one of its priorities. Just recently, President Trump sent a clear message to the international community that his trade wars aren’t finished yet and a weakening global economy will just have to deal with it.

PVB - The profit to be booked with revenue of VND350 bn?

For 2019, PVB targets to achieve VND350 bn in revenue, including (1) VND 315 bn from Nam Con Son 2, Phase 2 Project (2) VND10 bn from Vietsovpetro Project, and (3) VND15 bn from other projects. PVB only plans to record VND12.7 bn in profit, lower than last year’s number, which is quite conservative in our opinion. When posting VND 350 in revenue, we think that profits could be higher.

The US Dollar fluctuates around the peak

The EURUSD rate has been in a downtrend for the past 12 months. Euro weakness is explained by disappointing growth and Brexit distractions. The Dollar Index rose by 0.5% last Thursday and conquered the peak of 97 points again. Due to the euro’s large weight in the US Dollar Index’s basket of currencies, the Euro’s drop sent the US Dollar Index higher. Since March, the index has been fluctuating in a tight range of 96-97 points.

TPB – 1Q2019 Business Results and 2019 AGM Update

Overall, TPB is experiencing positive growth momentum in both net interest and service income. The growth is driven by a focus on mortgage and auto loans as well as bancassurance activities. For 2019, while TOI growth is expected to slow down due to lower NIM expansion, we think the burden of operating income is still significant as the bank plans to invest more on its digital strategy and expand the LiveBank network. The launching of a consumer finance business could support NIM growth but at the same time put more pressure on both operating and provision expenses.

TPB has positioned itself as a digitally-focused bank that uses advanced technology and automation in serving customers. Benefits may not be obvious in short-term but we found that LiveBank achieved certain recognition as the first of its kind. Digital products such as online banking apps, QR code payment and electronic wallets are facing intensive competition from other banks as well as fin-tech. In order to retain its leading position in digital banking, TPB will likely need to spend more going forward.

PNJ – Update on 2019 AGM

PNJ is set to benefit from rising demand for branded jewelry by Vietnam’s growing middle- and high-income class. It is the undisputed leader in this market owing a large retail network which is far ahead of its competitors. Strengthening the leading position in big cities and gaining more market share from mom-and-pop stores in tier 2,3 provinces (especially in the North) will be the challenge in the upcoming years. The ERP management system applied from Q2 / 2019 is expected to help PNJ enlarge its retail capabilities.

VNM – Finding the way to grow

Using a combination of FCFF and P/E methods with an industry average of 23x,  Rong Viet Securities estimate the target price for VNM to be VND129,500 per share, plus a cash dividend of VND4,500 per share, equivalent to an expected return of +3.3% compared to the current closing price. Therefore, we recommend ACCUMULATE for this stock. It should be noted that the above projection does not include contributions from GTNfoods' business results because we do not have much information about the upcoming cooperation strategy to include in the valuation.

KSB - 2019 AGM Update

We think FY2019 will be a challenging year for KSB due to (1) intense competition in stone (2) large capex for future projects (KSB plans to issue VND 1,000 billion in bonds) and (3) rising challenges in its industrial park as a result of ramp up compensation costs and other zones kicking off in FY2019 - 2020, including Nam Tan Uyen 3 (355 ha), VSIP 3 (691 ha) and the expansion of Tan Binh (1,000 ha). The stock is trading at current FY2019 P/E of 4.1x, based on the closing price on April 22.

Vietnam Capital Markets

“The macro is great but the micro is challenging” we often hear investors say about Vietnam. Indeed, Vietnam’s capital market is small, unsophisticated and remains hard to access particular for overseas investors.

We believe that in the next decade, we should witness significant financial deepening in Vietnam. Currently it is the only country in the region excluding China where bank credit exceeds the sum of listed bonds and equities. Credit provided by the financial sector has grown from 21% of GDP in 1997 to 142% 20 years later. Such growth rates are unsustainable for Vietnam.

Sonadezi Chau Duc (HSX: SZC) – Huge available land bank for leasing

SZC’s long-term upside potential comes from a large industrial land bank for leasing. The stock price is trading at 2019 forward P/E of 13.7x and P/B of 1.3x, which is not attractive for a one-year holder. However, we believe it is worth considering for long term investors providing the company can successfully restructure its activities and maintain stable inflow from the industrial park segment.

TCB – Update on business performance 2018 and 2019 AGM

So far, TCB has been successful in increasing revenues by expanding its customer base (mainly affluent individuals), widening product/ service offerings and reducing transaction costs. We see high potential in both bancassurance and TCB’s bond business and recognize its high profitability. We appreciate TCB’s sophisticated organizational development initiatives in brand positioning, customer relationship management and employee management which are in line with their overall organizational strategy and set the bank apart from peers.

Having said that, the positive earnings growth in 2017 and 2018 is partly due to extraordinary income including divestments and up-front fees. Also, it should be noted that TCB’s current business has concentration risks including the dependence on large corporate clients (especially in real estate development) as well as related mortgage loans to affluent and mass affluent segments.