MWG – Company Report introduction

Rong Viet Securities Corporation hereby presents the Company Report on Mobile World Investment Corporation (HSX: MWG) with the overall opinion as follows:

“Bach Hoa Xanh – the grocery chain has been identified by MWG as its focus for the medium and long term. We believe Bach Hoa Xanh is showing a lot of positive developments, especially since MWG adjusted its expansion strategy in the second quarter of this year. Most of the new stores have achieved the required customer traffic as well as sales in a very short time. The chain is also getting closer to the EBITDA break-even level.

VJC - Result Update on VietJet Aviation JSC

Rong Viet Securities Corporation hereby presents the Result Update on Vietjet Aviation JSC (HSX: VJC) with the overall opinion as follows.

PVB - Remove the obstacles

PVB is the first and exclusive coating company in Vietnam that supplies the service for most of oil & gas projects. The operations of PVB used to be in favorable conditions when oil prices were high and the oil & gas projects in Vietnam were in progress.

PAC – Short Term Outlook Remains Stable

2018 performance is expected to witness a slight improvement due to a decline in input material prices. However, in our opinion, there are still problems that PAC needs to tackle. 

CTG: High Provision Charges Likely to Undermine Earnings

In the first half of 2018, CTG’s total operating income (TOI) grew 6.2% YoY to VND 17.3 Tn. While net interest income (NII) grew 7% YoY and associated income declined 62%, services income became the bank’s driver with 32% YoY growth. It should be reminded that CTG divested from Aviva Assurance and reported one-off profit in 1H 2017. Excluding this amount, associated income grew 32.4% YoY, mostly contributed by Indovina’s earnings. CTG’s 1H 2018 PBT and NPAT were VND 5.3 Tn (+9.4% YoY) and VND 4.2 Tn (+8.5% YoY) respectively.

Digiworld is back distributing Nokia’s phones – the overall picture

On September 26, Digiworld and Nokia HMD signed a contract in which Digiworld will become the official distributor of Nokia products in Vietnam.

Vinamilk – Seeking Opportunities in New Export Markets

With the local demand for dairy products slowing down, large firms such as Vinamilk, are faced with one-digit organic growth over the next few years.  Hence they are seeking opportunities to add products as well as expand in international markets.  This is ceratinly a step which VNM must take to avoid facing the general decline in the domestic market. In VNM Result Update that Rong Viet Securities published recently, we mentioned that VNM is looking for opportunities to expand sales in markets such as Myanmar and Indonesia through the establishment of Joint venture with local companies. Why did VNM choose these two markets? Is this the right strategy? Traditional products such as condensed milk, powder milk and yoghurt are the main products that VNM is promoting internationally.

Shrimp Sector: the SIMP Program May Affect Exports from Vietnam in Early 2019

Shrimp exports are expected to recover strongly in the rest of 2018 and in 2019 after the announcement of the new tax rate. However, there is still a complicated barrier in the US market for Vietnamese exporters to overcome - the Seafood Import Monitoring Program (SIMP) program, which will come into effect on at the end of December.

FX - Euro

It seems that markets are ready to re-price the Euro to a higher level against the USD.

This could have an impact on Vietnam’s export and imports to/ from the EU. Companies involved in selling or buying goods and services to Europe should be keen to look at what potential impact this may have for them, if it materializes. The European Union is Vietnam’s third largest trading partner after China. A stronger Euro could also affect the import/ export relationship with the US, the largest trading partner.

Why do we think that the Euro could get stronger?

A Look at Ancillary Revenues of Low Cost Carriers (LCCs)

A small improvement in ancillary revenue/pax could give a huge boost to VJC’s earnings, as what happened in 2017. VJC’s number of international flights will likely increase further. We do not expect a huge jump but a stable and steady improvement over the years.

QNS - On the way to achieve the target of USD1 bn in revenue

QNS is the leading soymilk player in Vietnam with a 84% market share. However, the selling volume has been slowing down for two years, which has forced the company to change its strategy to adapt to the fierce competition from other peers if it wants to remain the leader

BID: Awaiting the removal of bottleneck

BID is in urgent need to raise capital buffers to meet the Basel II criteria. This will depend on the bank's ability to execute a public offering or private placement to strategic/financial investors. It is most likely that BID has selected a Korean bank as its strategic investor. In the meantime, BID is also organizing roadshows to seek potential financial investors. However, the process is long due to the requirement that the issuing price cannot be lower than the market price.

On Sep 14, BID has announced a Resolution for seeking shareholders’ written opinion in Oct 2018. We might expect that the resolution is related to the public offering or private placement to strategic/financial investors. The capital raising, if successful, will remove BID’s current bottleneck as well as improve its credit and profit growth potential. 

At the closing price on Sep 24 at VND34,900, BID’s forward PBR is estimated at 2.4, unattractive compared to the current average of the listed banks (excluding VCB), especially given BID’s moderate growth, high NPL and VAMC bond. We estimate the reasonable price for BID is at 35,000 VND, with an expected VND700 cash dividend for 2018, reflecting a 2.3% total return.