US stocks had their worst first-half performance since 1970

• A multitude of factors conspired to generate the stock market’s worst first-half since 1970, all centering on inflation.
• The Atlanta Fed predicts US second-quarter real GDP will be minus 1% (quarterly % change).
• MSCI is thinking about taking Nigeria out of its Frontier Index. Could be a boost for Vietnam.

The S&P 500 was down 20% in 1H 2022 (Figure 1). The tech heavy Nasdaq fell 30%.

HND – To change depreciation schedule from 2Q2022

• The AGM approved the 2022 financial guidance, which targets revenue and NPAT to be VND 10,574 bn (or USD 460 mn, +17% YoY) and VND 596 bn (or USD 26 mn, +32% YoY), respectively. We see this guideline as conservative as we estimate that the company is able to exceed its guideline in 1H2022 in NPAT terms.
• In 1Q2022, HND posted revenue/NPAT of VND 2,539 bn/VND 258 bn (or USD 110 mn/ 11.2 mn), +22%/+39% YoY. We forecast NPAT in 2Q2022 to double compared to last year.  In 2022, we forecast revenue and NPAT to be VND 10,286 bn (or USD 447 mn, +14% YoY) and VND 741 bn ( or USD 32 mn, +64% YoY), respectively.
• Currently, hydropower plants have outperformed due to favorable hydrological conditions that hinder thermal plants to earn profit during La Nina phase. However, investors can ACCUMULATE the stock to benefit from cash dividends and wait until the El Nino phase. Our target price for this stock is VND 23,000, comprising VND 800 of dividends in the next 12 months, offering an upside of 49% compared to the closing price as of 2022, Jul 08^th.

Vietnamese rice producers: bright outlook in 2022

• Although global rice prices have been going down in June-2022 after India announced that its rice production will increase thanks to the monsoon season in 2H2022, prices stayed high compared to the same period last year. The global price of rice on Jul 4th is 16.1 USD/cwt (-4.1% MoM; +25.4% YoY).
• We expect Vietnam ‘s rice export prices to be flat in 2H2022 due to the upcoming monsoon season in India and the downtrend of fertilizer prices (account for 22% of total rice production cost) since Mar-2022. However, we expect that Vietnam ‘s rice export volume will keep growing based on 1) increasing rice demand from the Philippines; 2) resumed imports from China; and 3) growth opportunities from the EU market.
• We believe that gross margin of Vietnamese rice producers will improve as the downtrend of fertilizer prices will continue in the near future. In addition, logistic costs - Baltic Dry Index (BDI), is expected to decrease in 2H2022. Backed by this, we expect that Vietnamese rice producers will enhance their net profit margin.

HVN – The Plan of Substantial Net Loss Poses a High Delisting Risk

• HVN sets a 2022 guidance for parent company with revenue of VND 45.2 trillion (+147% YoY), on the back of strong recovery of passenger volume, and net loss of VND -9,335 bn (slightly improve vs 2021 net loss of VND –12,907 bn) due to concern over high fuel costs.
• Restructuring plan for the 2021-25 period was introduced and will be submitted to competent authorities for approval. Key solutions in the plan are restructuring assets (fleet, investments in subsidiaries) and raising charter capital over 2022-25 period.
• The likelihood of being delisted from HOSE is high if HVN continues to incur losses in 2022, which leads to three consecutive years of losses.

ITD – Stable growth post-pandemic

• ITD’s financial result was gloomy in 2021. ITD's consolidated net revenue reached VND 363 billion, completing only 55% of the target set for 2021 (VND 660 billion), decreasing 10.8% YoY.
• In 2022, the company targets revenue and NPAT of VND 820 billion (+126% YoY) and VND 30 billion (+8.3% YoY),
• The enterprise expects growth in the medium and long term to rely on (1) the increasing demand for digital transformation and software outsourcing and (2) positive outlook from Intelligent Infrastructure segment.

Mexico. Ola, como esta?

• Since most Mexicans do not own stock, they do not really care about markets.
• What is most important is purchasing power/ price of goods. In the current environment it has become crucial.
• Mexico had 31.9 million international tourists in 2021, 31% more than in 2020.

DPM – Weak domestic urea demand and falling selling prices to put pressure on profits in 2H2022

• DPM estimates a consumption volume of 400 thousand tons of urea in 1H2022, of which 160 thousand tons were exported. We see that domestic production has fallen sharply, which could be attributed to high urea prices. Meanwhile, the NPK segment recorded a consumption volume of 85 thousand tons, up slightly compared to the same period last year.
• The positive point of DPM is its ability to pay high cash dividends of VND5,000/share for 2021 and VND5,000/share for 2022. Currently, the company has paid VND1,000/share in advance.
• For 2022, we forecast DPM's revenue and profit after tax to reach VND16,670 bn (+30.4%) and VND4,366bn (+40,1%). With unfavorable changes in demand and selling price, we lower DPM's target price to VND 44,700/share. At this price, the dividend yield is very attractive.

NLG – Profit is expected to be recognized in 2H/2022

• The timing of revenue and profit recognition is anticipated to be in H2 2022, but this is highly dependent on the Paragon Dai Phuoc and Can Tho projects' legal completion.
• Accumulated in the first 5 months of the year, the total pre-sale value of NLG reached VND 7,800 billion, 14% higher than the figure of VND 6,880 billion in 2021. We think that the successful legal completion of The Can Tho, Nam Long Dai Phuoc, and Hai Phong PG projects this year will have a significant impact on whether or not the planned pre-sale of VND 23,400 billion will be realized.

Recession fear clouded export prospects in the second half of 2022

• Export growth has slowed down in May 2022.
• Recession fear clouded export prospects in the second half of 2022.
• Imports remained robust in May 2022.
• Biden administration intends to remove tariffs on Chinese good

Banking sector – The continuous pressure motivates an accommodative intervention

• The liquidity position continued the previous abundant status for VND. On the other hand, the tension on USD liquidity intensified due to the Fed’s decision, the SBV’s target to support the economy and the persistent trend of USD outflow.
• The highly negative USDVND rate gap put pressure on the exchange rate which had moved sideways before rising steadily recently. The SBV has started doing outright bill sales with short-dated term, substantial amount and auctioned interest rate. It is probable that this intervention is to withdraw VND and propel VND interbank rates for the short terms, thereby, narrowing the swap rate gap, monitoring the pace of exchange rate and relieving the pressure on FX reserves.