Real Estate Market – Supply-demand asymmetry and increased interest rate pressure will bring difficulties to suburban projects and resort tourism in 2023
30-11-2022
: KDH
: Real Estate
: Anh Tran
Tags: Real estate
- The demand for housing in Hanoi & Ho Chi Minh City is currently excessive and it is forecasted that the demand will continue to increase in the coming years measured by the following factors: (1) the annual population growth rate, (2) the increasing scarce land fund and (3) the infrastructure connecting Ha Noi and HCM with suburban areas has not yet been synchronously implemented. On this basis, we appreciate the short, medium, and long-term prospects of enterprises owning large land funds in Hanoi and Ho Chi Minh. In which some listed companies such as VHM, KDH, HDG.
- However, in the favorable context, credit growth is expanded and interest rates remain low in the period 2018-2021 and investment demand increases significantly during the COVID-19, project development activities in the suburbs of Hanoi & Ho Chi Minh and other areas with potential for tourism development recorded an explode, in terms of demand, these projects have not focused on the segment of customers who have an actual desire to buy houses for accommodation.
- Following many difficulties in 2022, we believe that the monetary policy in 2023 will still be quite challenging for real estate development activities for investment/speculation. On the other hand, we believe that housing projects concentrated in areas with high population density and meeting real demand will still have good liquidity. However, the number of these projects is not many and not many businesses in our analysis portfolio have this supply available. Therefore, we expect investors to have more better sales policies (including discounts on sale prices) in projects are about to be opened for sale to stimulate demand.
ELC – Intelligent Transport System Segment To Contribute More Meaningfully
29-11-2022
: ELC
: Technologies
: Tung Do
Tags: ELC
- ELC recorded 3Q2022 revenue of VND250 billion (+19% YoY) while 9M-2022 revenue reached VND 626 billion (+23% YoY), led by Intelligent Transport System (ITS) segment (+73% YoY, accounting for 40% of total revenue) and Telecom segment (+29% YoY, accounting for 29% of total revenue).
- Due to the robust growth of ITS and Telecom segments, 9M-2022 gross margin improved by 120 bps YoY to 17.8%.
- However, 9M-2022 NPAT-MI declined by 26% YoY due to the surge in selling and administration expenses +39% YoY and higher minority interest expenses compared to the same period last year.
- ELC is trading at a TTM P/E of 11.3x (vs a 5Y average of 21.4x) and P/B of 0.7x (vs a 5Y average of 0.4x). We are pending a fuller review on ELC and will update recommendation and TP for the stock in the next report.
Update on monetary market in Nov 2022
28-11-2022
: VDS
: Macroeconomics
: Ha My
Tags: Monetary market
- 2022’s M2 growth is less than half of the average growth rate in the period 2013-21.
- Liquidity pressure eased somewhat in November 2022.
- The interest rate race is getting hotter toward the end of the year.
FMC – Short-term headwinds before entering a new growth phase
25-11-2022
: FMC
: Fishery
: Loan Nguyen
Tags:
- Accumulated 10M-2022, FMC recorded a revenue of USD 201 Mn (+13% YoY). However, revenue in September and October started witnessing a deceleration compared to the previous months, driven by weak demand of importing countries amid inflationary pressure. However, we expect Q4/2022 NPAT-MI to only derease 13% YoY on the high base of Q4/2021, at VND 91 Bn (or USD 3.8 Mn), partly contributed by a large FX gain which is attributable to USD appreciation.
- 2022 revenue and NPAT-MI are projected to be VND 6,059 Bn (or USD 253 Mn, +17% YoY) and VND 323 Bn (or USD 13.5 Mn, +21% YoY), respectively. In FY2023, we project that revenue and NPAT-MI to reach VND 6,249 Bn (or USD 260 Mn, +3% YoY) and VND 356 Bn (or USD 15 Mn, +10% YoY) respectively.
- Using a combination of FCFF (40%) and P/E (60%), We arrive at a fair value of 45,000 VND/share, plus a cash dividend of 2,000 VND/share expected for 2022. This is equivalent to an expected return of 48%, based on the closing price on November 25th, 2022. We recommend to BUY this stock in long-term horizon.
PC1 – Lay down the foundation for growth in 2023
24-11-2022
: PC1
: Power
: Thao Nguyen
Tags: PC1
- In 3Q2022, PC1 posted revenue and NPATMI of VND 3.006 bn (or USD 123.3 mn) and VND 66 bn (or USD 2.7 mn), -4% YoY and -54% YoY, respectively. For 9M2022, PC1 earned VND 262 bn (or USD 10.7 mn) in terms of net profit, -10% YoY. Per our estimation, revenue /NPATMI in 2022 will be VND 8,162 bn/201 bn (or USD 333/ 8.2 mn), -17%/-71% YoY, implying a loss in 4Q2022.
- Heavy FX loss in 2022 will lay the foundation for growth in 2023. Notably, most of the financial expenses in 2022 are unrealized losses while the power revenue stream is based on USD, hence part of those expenses will be compensated in coming years. Earnings in 2023 are forecasted to more than double that in 2022.
- Currently, PC1 is trading at 0.9x and 10.8x in terms of P/B and P/E, respectively, which is lower than that of 5-year average. Despite the risk of the interest rate hike and VND depreciation in 2023, we foresee the magnitude is lower than that in 2022. We revise down our target price for PC1 to VND 26.000 to reflect (1) the interest rate hike and (2) lower earnings in FY22 and FY23. In comparison to the closing price as of Nov 24th, 2022, this stock offers an upside of 63%, hence, investors can BUY and hold for the long run.
LHG – Expect to see earnings boost in 2025
23-11-2022
: LHG
: Industrial Land RE
: Hung Le
Tags: LHG
- In 3Q2022, the total revenue reached VND 178 billion or USD 7.4 million (+242% YoY) and NPAT was VND 82 billion or USD 3.4 million (+310%YoY). The robust growth was due to low base effect of 3Q2021. In 9M2022, LHG’s revenue declined 27% YoY to VND 525bn (~USD21.8 million) and its NPAT plunged 37% YoY to VND172bn (~USD 7.1 million)
- From LHG’s EGM, we learned that the company (1) may not meet its 2022 revenue plan; (2) considers choosing AFC or A&C to audit its 2022 FS; and (3) LHG will see earnings boost in 2025 as new projects including Long Hau 3 phase 2, An Dinh and Long Hau 3 urban project can be commercialized.
- We continue to maintain a positive long-term outlook for LHG as (1) ready-to-lease area (~30 ha) at Long Hau 3 phase 1 is enough to secure LHG’s earnings performance until 2025, (2) short-term benefit from the deep depreciate of the Dong given its quoting price in USD, (3) ~10 hectares leasing facilities bring stable income source for LHG.
- We revise down our target price to VND 36,000/share due to (1) factoring liquidity risk by taking a discount by 20% of NAV as LHG being limited trading time; (2) eliminating the last 20 hectares that had yet been cleared in Long Hau 3 phase 1; and (3) temporarily eliminating An Dinh and LH 3.2 until the investment policies get approvals. Adding an annual cash dividend of VND 1,700 per share, the total expected return will be +98.4% (compared to the closing price of 11/22/2022).
Textile & Garment sector’s export market demand outlook in 1H2023: Headwinds are still blowing
22-11-2022
: STK
: Textile & Garment
: Hoai Trinh
Tags: Sector outlook
- We are turning more cautious on the order outlook for Vietnamese OEMs due to inflation-led consumption weakness in the export markets in 1H2023.
- Retail sales of clothing and footwear in Vietnam’s main importing market have shown signs of declining since Oct 2022. In the three months to Oct 2022, clothing was amongst the worst categories of non-food retail sales in the UK. In our view, it is tough for Vietnamese OEMs clients to increase sales growth in what looks like a slowing market.
- While the export market’s demand has slowed down, retail inventories have gone up, accumulating headwinds for Vietnam’s textile & garment order outlook.
NKG – Tough Time has not Ended but Valuation Turned Attractive
21-11-2022
: NKG
: Materials
: Tam Pham
Tags: NKG
- Declining demand and high input price drove down profits in 9M2022. Revenue posted VND 18,771 billion (USD 782 mn, -3% YoY), whereas PAT tumbled by 84% YoY to VND 290 billion (USD 12.1 mn). 9M2022 gross margin decreased to 9% (9M2021: 16.6%), with a slump to -3.6% in Q3.
- For 4Q22, consumption will be worse than Q3. Sales will rely mainly on domestic market with domestic GPM less negative than export margin. High-priced inventory, selling price drop combined with provisions for inventory devaluation could make Q4 GPM fall to -27.4%. Revenue and loss of Q4 is forecast to come at VND 2,630 bn (-70% YoY) and –VND 865 bn. In sum, 2022 revenue could come at VND 21,398 bn (-24% YoY) while the bottom line could be a net loss of -VND 575 bn.
- Milder inflation from mid-2023 will encourage the global demand for coated steel, supporting export volume. A strong rebound of export is not expected because the trade policies in major markets have been increasingly challenging to Vietnamese producers. Domestic market is expected to be the main driver for growth in 2023. Gross profit margin will reach 5.5%, marginally higher than 4.5% of 2022. 2023 revenue and PAT-MI could reach VND 21,455 bn (+0.3%) and VND 147 bn.
- Applying three valuation methods including discounted FCFF, P/E and P/B, we arrive at a target price for NKG of VND 11,800/share, which is equivalent to a BUY recommendation with an upside of 30%, based on the closing price of November 18th, 2022. Considering the current P/B of 0.42, which is much lower than the 10-year average of 0.87, the current valuation seems to be attractive for long-term investment in NKG. The forward BVPS for 2022 and 2023 are VND 18,044/share and VND 18,588/share, or P/B at the end of 2022 and 2023 are 0.50 and 0.49, respectively.
MCM – A potential growth driver for Vinamilk
18-11-2022
: MCM
: Food, Beverage & Tobacco
: An Nguyen
Tags: MCM
- Q3 2022, Moc Chau Milk recorded a growth of net sales at the rate of 4.7% YoY, equivalent to VND832 bn, explained by the diversifying product range. The SG&A expenses increased by 18.5% YoY but dropped 4.5% QoQ, proving MCM’s effort in optimizing operating costs. As a result, Q3 2022 net profit reached VND99 bn (+10% QoQ; +4.2% YoY).
- Despite of rising inflation, MCM saw 9M2022 net sales of VND2,346 bn (+6.3% YoY), driven by both higher ASP and higher selling volume. Backed by supports from Vinamilk, profits rose at stronger pace than revenue. 9M2022 net profit was VND274 bn (+18.4% YoY). Compared to 2022 revenue and profit targets, MCM completed 75.1% and 79.7%, respectively.
- We expect MCM ‘s net sales and net profit to reach VND3,171 bn (+8.4% YoY) and VND346 bn (+8.5% YoY) in 2022, respectively. Because VNM ‘s dairy market share is over 55%, thus it is hard to boost strong growth in organic sales. However, combined with strong growth of subsidiaries, VNM is expected to show high single-digit sales growth.
Seaport – Less positive outlook at the end of 2022
17-11-2022
: SCS
: Seaports
: Quan Cao
Tags: Sector outlook
- We estimate the total trading containerized cargo via sea growth +29% YoY, reached USD 95 billion in Q3-2022. In which, export and import turnovers are estimated at USD 54 billion (+36% YoY) and USD 41 billion (+22% YoY), respectively. The high growth rate is due to the low base during the Q3-2021 social distancing period.
- According to the Maritime Administration, cargo throughput at seaports in Q3-2022 reached 6.1 million TEU (+10% YoY) (-8% QoQ). Accumulated 9T2022, total cargo throughput reached about 12.7 million TEU (+5% YoY). Total throughput decreased over the month, which is evident in some major ports in Ho Chi Minh City and Vung Tau.
Rough period could last until 2023
16-11-2022
: DIG, KDH
: Real Estate
: Anh Tran
Tags: Sector outlook
- Since 1986, after Vietnam had moved toward a market economy model, Vietnam's real estate market has experienced three strong growth periods, in both market size and selling price (1993-1996, 2007-2010) and experienced declines in the following years. These fluctuations was attributable to changes in land policies and monetary policy.
- We believe that the real estate market has entered the third booming period (2018 – 2021) thanks to the recovery of banking system after restructuring, expanding monetary policy and COVID-19 pandemic. However, the contraction period could have started from 2022, when (1) capital raising through bond market has been congested and (2) credit policy gradually shifted to strict regulation, especially real estate sector. According to data from the Ministry of Construction, in 3Q2022, most residential real estate activities showed signs of significantly slowing down compared to the same period last year. The number of licensed and eligible projects for sale decreased by 8% and 23% over the same period.
- In short term, we believe that macro-economics difficulties should not be resolved. In addition, if compared with previous cycles, it is expected that it will take two to three years for the real estate market to start a new recovery.
External demand weakened sharply in Oct 2022
15-11-2022
: VDS
: Macroeconomics
: Ha My
Tags: Trade Macroeconomics
- Export growth weakened significantly while imports improved slightly from the previous month.
- 2022’s export turnover is estimated at $375-380 billion, up 12-13% over the same period.
- 2022’s import turnover is estimated at $363-366 billion, up 9-10% over the same period.
30-11-2022
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