MPC AGM - 2019 Plan Needs Great Effords

Although the company has adjusted down its 2019 plan, we still concern its ability to complete the revised plan. EVFTA, if comes into effect in 2020, is not likely to support sales as EU is not among strategic markets of MPC. The risk of being charged guilty for anti-dumping duty evasion in the US market does exist while the back-up plan is not clear. In addition, the company unclear answers to many strategic issues as well as important differences in business and investment plans before and after the private placement to Mitsui raise doubts among us about the transparency of the management. We recommend investors to MONITOR this stock.

VGBs’ issues: “Strange signal”

Following the government bond auctions, we figure out a strange signal which the offering value plunged and was divergent from the published plan of 2Q 2019. In this quarter, Vietnam State Treasury (VST) successfully issued VND 35.6 trillion, well below the target of VND 80 trillion. In 1H2019, the department got VND105 trillion, equivalent to 70% of the initial plan. Remarkably, the lower-than-targeted outcome was because VST intentionally reduced the offering scale in 2Q 2019, in our point of view. The ratio of offering to planned value was at 0.6 times, the lowest level in recent 3 years. In 3Q 2017, the figure was at 0.8 times.

NKG- AGM Updates

NKG's 6M2019 net profit is estimated at VND 20-25 billion. Thus, Q2’s NPAT alone is estimated at over VND 120 billion. We found that when the price of hot rolled coil (HRC) in 2Q was barely higher than 1Q (USD 557 per ton compared to USD 548 per ton), the profit was achieved by two transfers of Nam Kim 1 Plant and the capital contribution in the Nam Kim Corea JV. In addition, we believe that the NPAT may partly be due to a sharp decrease in interest expenses due to short-term debt reduction. Therefore, it is likely that core business in 2Q of NKG has not fully recovered.

The Outlook of Consumer Credit in Vietnam

As mentioned in our previous Analyst Pinboard "Consumer megatrends in Vietnam", Vietnam consumer market is considered quite attractive with high and stable growth rates and in recent years. There are many attributes to the development of this market, such as positive economic expansion and the growth of the middle class in society. In addition, due to favorable conditions of the economy since 2014, the Vietnamese consumer confidence index (CCI) has increased, peaking at 129 in 3Q 2018 and 1Q 2019. More specifically about spending trends, in recent years, Vietnamese consumers became more willing to purchase high value items after paying essential living expenses, such as high-tech devices or vacation/travel, to improve living standards. At the same time, payment method gradually shifts from cash to non-cash, and Vietnamese tend to be more willing to borrow for instant purchase instead of saving until they accumulate enough to buy such items.

Result Update on PetroVietnam Transportation Corp (HSX: PVT)

We rate BUY for PVT with a target price of VND20,100 per share, based on the FCFF and P/E method. Including the VND1,000 cash dividend, we arrive at a total return of 29%, based on the closing price on Jun 27^th, 2019.

NTC AGM - Capital to be soon raised for Nam Tan Uyen 3

Nam Tan Uyen Industrial Park JSC (UpCOM: NTC) held its FY2019 AGM on June 27 in Binh Duong. The stock price increased 84% YTD albeit uncertainties related to the deployment of Nam Tan Uyen 3 zone (NTU3). NTC’s source of income should only come from NTU3 at this time. The zone has a total area of 346 ha, in which 255 ha are leasable. Our key notes are as followed:

GEG - Abundant Source of Projects for Renewable Energy Development

In summary, we recognize the will and ambition of the company to become the leading player in the renewable energy industry in Vietnam, considering that the management plans a large portfolio of solar and wind power projects. However, we also need to emphasize that the prospects of these projects are still  uncertain until all legal procedures are completed.  In the coming years, the company plans to maintain 10% cash dividend, corresponding to a dividend yield of 4.5 % at current share price.

VCB – Well-controlled Cost

Given the stable growth of lending activities and lower growth rate of deposit, we believe that interest income will be the key driver of VCB’s TOI in 2019. We also see that VCB has been well-controlling its cost both in operating and provision. Therefore, despite of the absence of one-off income in 2019, we estimate VCB’s PBT will grow 19.6% YoY and be 9% higher than its 2019 plan. VCB’s NPAT will be VND 17.5 Tn (c. +20% YoY), corresponding to EPS of VND 4,277. We revise up our VCB’s target price to VND 72,500, equivalent to 2019 forward PBR of 3.2x.

ACV - 2019 AGM Update

2018 Recap: Passenger growth rate has shown signs of slowing down, PAT increased strongly after applying the service prices increase in accordance with Decision 2345 of MoT.

Impact of US-China trade war on the Textile & Apparel Industry

Overall, the escalation of the trade war has undermined the decline in Chinese textile exports to the US market. Under concerns about the possibility of imposition of additional duties on garment products from China in the future (a USD 300 bn tax package being submitted), fashion companies in the US should shift its orders to the neighboring markets to prevent risks. However, we believe that China has not stepped foot in this war, it is increasingly improving the skills of workers, focusing on producing high quality products, developing upstream textile to minimize the risk of price competition from neighboring countries, including Vietnam.

PDR - Focus on projects in Binh Dinh

Phat Dat Real Estate Development JSC (HSX: PDR) is a longstanding real estate developer whose a major project of under one-hectare clusters in HCMC. As HCMC market has been slowing down, PDR has shifted its focus to the central region. This is reflected in the 5-year plan with CARG of 38% and 51% of the developed land area concentrating in Binh Dinh (171.8 ha) and Quang Ngai (49.8 ha). Part of these income stream will be used to acquire new land bank in HCMC with the expectation of deployment when the market rebounds.

NT2 – Weak 2019 earnings outlook despite of improvement in core business

In summary, we forecast that NT2’s 2019 NPAT would reach VND 753 billion (-4% YoY), corresponding to EPS of 2,569 VND/share. While management team has expressed their will is to maintain cash dividend stable at 2,500 VND/share, we believe that such dividend policy would require the company to use short-term borrowing to finance the shortfall in working capital. This condition would remain until 2022, when NT2 has repaid its long-term debts and has ample free cash flows to pay dividend. We maintain our target price for NT2 stock at 27,100 VND/share, implying a marginal upside from current market price. However, we also recommend investors to wait until the new PPA price for Nhon Trach 2 plant is finalized to assess the outlook and valuation of the company.