Updates on monetary market in Aug 2022

• Credit growth slowed down in 3Q22.
• The pressure to loosen the credit room is strong, the SBV may have to be more flexible in granting credit room.
• Lending interest rates will increase more strongly in the second half of the year.

HAX – Favorable business conditions support strong growth

• A 50% reduction in registration fees for domestically produced cars  which expired in 1H2022  and rising private car demand after Covid-19 pandemic helped HAX sales growth by 23.3% YoY in Q2 2022 to  VND1,546 bn. Q2 2022 NPAT-MI surged to VND81 bn (+1,287 %YoY) thanks to higher average selling prices and huge financial profit from bank deposit ‘s interest (VND11.9 bn).   
• 2022 sales are forecast to be VND6,043 bn (+8.9 %YoY) based on 1) favorable business conditions; and 2) higher market share thanks to the launching of the new showroom “Mercedes-Benz Haxaco Cần Thơ”. Accordingly, 2022 NPAT-MI of HAX should reach VND280 bn (+75% YoY), backed by 1) higher ASP; 2) absence of abnormal expenses related to Covid-19 pandemic; and 3) commissions from Mercedes-Benz.
• With a FCFF valuation model (50%) and multiples comparison (50%) with an applied P/E of 5.5x, our target price is VND26,500. Adding a cash dividend of VND500, the 12-months expected return is 9.8% compared to the closing price on Aug 25th 2022. Therefore, we recommend to ACCUMULATE this stock.

Shipping line – Shipping costs might ease until 2023

• Global shipping rates have cooled down.
• Yet It Might Stand At A High Level in 2022.
• Global Shipping Costs Might Ease Until 2023. We expect domestic shipping rates to ease in 2023.

PHR – Potential valuation is unlocked by rubber land transformation

• In 1H2022, PHR’s revenue posted VND 607 bn (USD 26.4 mn, -19.6% YoY) and NPAT reached VND 355 bn (USD 15.43 mn, +109.1% YoY). Revenue deteriorated due to rubber and wood processing segments. The surge in the bottom line was the result of compensation payment from VSIP 3 and helped lifting performance of the first half.
• PHR has planned to convert 5,600 hectares out of 15,000 hectares rubber farm in Vietnam into industrial parks. Of which, 2,600 hectares area of four IPs including NTC 3, VSIP 3, Tan Lap 1 and Tan Binh expansion might be put into operation in 2022-2024. Which is a huge land bank to develop in long-term.
• In 2022, we estimate that the total revenue and net income will be VND 1,703 bn or USD 73.09 mn (-12.5%YoY) and VND 1,041 bn or USD 44.68 mn (+103% YoY) respectively. Correspondingly, the EPS will be VND 5,194. Based on the sum-of-the-parts valuation (SOTP), the target price is 88,400/share. Adding an annual cash dividend of VND 4,000 per share, the total expected return will be +31.35% (compared to the closing price as of 08/22/2022).

SMC – Q3 Could be the Hardest Time of the Year

• Profits reduced 82% YoY in 1H2022 because gross profit margin dropped to 3% from 10.1% in 1H2021, a sharp increase in losses from exchange rate difference and high interest expense.

• Processing orders are weak and plans to invest in new factories are being delayed.

• In 2H, we expect a loss in Q3 due to high-priced inventories before a recovery in Q4. HRC price seem to have bottomed in August but is not likely to rally quickly in a short time, amid high uncertainties of pandemic, geopolitics and high inflation. Pressures on the profit margin of the processing segment will be high as the material inventory period of this segment is higher than that of the trading segment.

• For the whole year 2022, we forecast revenue and NPAT-MI to arrive at VND 24,164 bn (+13% YoY) and VND 106 bn (-88%) with a loss of VND 62 bn in Q3.

• SMC is now trading at a TTM PER of 4.8x, higher than 2.9x of 2021. However, as this year profit will be lower compared to the peak of last year, the PER forward for 2022 is 13.7x. Thus, the stock seems unattractive at the current valuation. We recommend to OBSERVE SMC until demand shows signs of firm recovery.

IT industry – Digital transformation for sustainable growth

• Global digital transformation spending is projected to grow 17.6% in 2022, reaching USD 1,800 billion with growth at 16.6% CAGR from 2022F to 2025F.
• The trend of digital transformation is widespread across all the fields of the public and private sector in Vietnam. The target in 2022 will be 63/63 localities deploying at least one digital platform and 70,000 digital transformation enterprises.
• It is estimated that the size of Vietnam's IT market (including items on hardware equipment and software solutions) will reach VND 208 trillion, which will be the main driving force for large corporations such as Viettel, VNPT, FPT, CMG to grow double-digit in the long-term.

KDH –Sales activity slowed down in 1H2022, but expected to dynamic from Q3 2022

• In Q2 2022, KDH recorded a revenue of VND 875 billion (-55% YoY) which mainly due to a decrease in the number of handover products, particularly, the company hand-overed 40 apartments in Clarita project. However, the profit margin recorded at high level, 69%, and the decrease in payment discount expense in this quarter, which made NPAT recorded positive growth, +22,8% yoy to VND 265 billion in Q2 2022. Accumulated in the first 6 months, revenue and NPAT reached VND 875 billion (-55% yoy) and VND 624 billion (+32.2% yoy) respectively.
• In the early days of August 2022, KDH signed a distribution agent for Classia project with Smart Landand and expects most of the projects to be recognized as revenue within the year. Accordingly, we estimate the revenue and NPAT to record VND 2,492 billion (+39% yoy) and VND 862 billion in H2/2022, In which, mainly contributed from handover of rest of classia project.
• In 2022, we forecast the revenue and NPAT at VND 3,367 billion and VND 1,487 billion, respectively, equivalent to growth of -10% yoy and 23% yoy respectively, completing 84% and 106% business plan. EPS estimate at VND 2.006 per share.
• Rong Viet recommend the target price of KDH at VND 43,660/share, equivalent to 8,9% gain, compared to closed price on 18/08/2022. We recommend ACCUMULATE this stock leaned on medium – long term growth.

Banking sector – Update on the money market

• Due to SBV’s intervention to alleviate the pressure from the negative swap gap, VND interbank rate surged as the VND was withdrawn through USD spot deals and bills. Since the end of July, interbank VND liquidity has improved and the USD/VND swap gap has dropped accordingly, staying at around 0.8-1.2% for the overnight term as of August 11.
• The increase in FX swap rate gap contributed to cool down the exchange rate at the end of July. On the international market, the USD also experienced a turbulent July as it reached a 20-year high before dropping sharply and closing July at 106.

FPT – 7M-2022 Results Update

• Telecommunication sector recorded a 16% YoY growth in revenue in 7M-2022, led mainly by Pay TV, DC, leased lines services while broadband service decelerated significantly at 3% YoY in 1H-2022.

Trade growth weakened in Jul 2022

• Trade growth weakened in Jul 2022.
• Exports had a divergence in growth in both product groups and markets.
• Imports of raw materials continued to decline sharply.

LHG – Earning will go back to growth trajectory in 2H2022

• In Q2 22, LHG recorded a plunge of 58% YoY in revenue to VND 233 billion (~ USD10 million). NPAT plummeted by 81% to VND 41 billion (USD ~1.9 million). The YoY decline was due to (1) high base of 2Q2021 as LHG recorded a historical high in earnings owing to leasing contract of 10 hectares with LOGOS, and (2) deteriorating GPM of the industrial land leasing segment to 18% in the last quarter.
• In the long-term, we are confident that LHG will perform well as (1) the historical performance shows an absorption rate of above 10 hectares annually, the remaining leasable are in LH 3.1 ensuring enough inventory (~ 60 ha) for Long Hau until 2026, LH 3.2 (90 ha) and An Dinh (200 ha) will be commercialized in 2024, (3) the leasing price will keep going increase due to its prime location close to key infrastructures.
• In 2022, we estimate that the total revenue and net income will be VND 865 billion (or ~USD 37 million, +10.7%YoY) and VND 256 billion (or ~USD 11 million, -14% YoY), respectively. Correspondingly, the EPS will be VND 4,758. Based on the sum-of-the-parts valuation (SOTP), the target price is 56,300/share. Adding an annual cash dividend of VND 1,700 per share, the total expected return will be +60.2% (compared to the closing price of 08/11/2021).

PPC – Turning a loss from profit in 3Q2022

• PPC’s 2Q 2022 performance is well aligned with our expectations emphasizing the company's predictability of weak results. PPC's sales volume in 2Q 2022 was 827 mn kWh (-11% YoY). Nevertheless, 2Q net revenue slightly increased 6% YoY to VND1290 bn thanks to higher CGM prices. NPAT slumped 38% YoY, to VND75bn, mainly due to a lack of financial income coming from cash dividends of QTP and HND.
• In 2022, we forecast that PPC will provide around 3.7 bn kWh of sales volume, with net revenue and NPAT of VND 5,640 bn (+45.8% YoY) and VND 407 bn (+88.0 % YoY), respectively. Dividend income from associate companies HND (VND 800/share) and QTP (VND 800/share) paid in Q3 2022 will save PPC’s 2H2022 bottom line.