VPB – Credit Growth to Slow Down

For 2019, we expect customer loan growth of parent bank and FC will decrease to 19% YoY and 14% YoY. Parent bank will make more provision on VAMC bond so its total provision expense will equivalent to 2018’s while FC’s provision expense will slightly increase. Consolidated PBT will be around VND 9.3 Tn (+1% YoY), excluding one-off income of VND 856 Bn in 2018 (from banca upfront fee), 2019 PBT will grow 11% YoY.

At the current price of VND 20,300, VPB is trading at PBR of 1.4x, which significant decreased from that of earlier 2018, and is slightly lower than its peers’ average PBR. However, we think it is difficult for the bank’s PBR to be reverted to high level as previously unless VPB’s consumer lending, mostly targeting into cash loan, shows improvement. Using DCF and PBR valuation methods, our 12M target price is VND 24,800, 22% higher than its current market price. However, due to the slowdown in consumer lending segment, as well as the new draft circular regarding to this business, investor should wait until there is latest announcement from the officials.

VIB – Update on 2018 Business Performance and 2019 Plan

By actively raising capital and boosting lending over the last two years, VIB has expanded significantly from a small bank to become one of the well-known players in retail banking. We appreciate VIB's sales competence and business efficiency improvement when expanding into retail lending and bancassurance. VIB is also one of the first two banks who were approved to adopt Circular 41 capital adequacy requirements, for which the bank expects to be granted a higher credit growth limit than other banks. Although the quota given by SBV is not likely to reach 35% as per the bank’s plan, we think VIB can still push non-interest income to compensate for lending constraint. However, we hold the view that the profit generation ability in securities, gold and foreign exchange trading needs to be enhanced further. In addition, the bank also needs to spare more resources to improve it current asset quality. Last but not least, the boosting of retail lending on the back of mortgage loans can pose a risk for VIB in case the real estate sector falls into a downward cycle.

Update on FRT – Trying to maintain growth

In a saturated ICT industry, short-term prospect of FRT is not too bright, despite efforts to maintain growth from installment programs and opening more stores. Less positive Q4 result, difficulties from F.Studio and the slow progress of Long Chau were the reasons for the negative performance of FRT stock price recently. FRT will only be suitable for long-term investment with prospect in Long Chau from 2020 onwards

PHR – 2019 AGM Update

Although natural rubber prices remained at low level during 2018, hitting PHR’s core business, the company still achieved a record high NPAT thanks to large income from rubber tree liquidation. In its 2019 AGM, PHR revealed that there were still ample sources of one-off income to keep its PBT above VND 1,000 billion in 2019 – 2021 period.

SAS –2019 AGM Update

SAS operates in non-aviation services at Tan Son Nhat (SGN) and Cam Ranh (CXR) International Airport. In addition, SAS also operates tourism services and resorts in Phu Quoc.

Will be there a recession?

Financial investors are obsessed with the US inverted yield curve, seen historically as an early indicator of an upcoming recession in next 6-24 months. Since 1960, bond investors have been right about predicting recessions. Currently, 3-month treasury bonds are yielding more than 10-year ones. Last year, there was an inversion between the US 5-year and 2-year treasury bonds, then between the US 10-year and 2-year ones. Besides, the US economy is running at full-capacity as the unemployment rate is well below the threshold of 4%.

Update on money market

• The SBV withdrew more than VND25 Tn from OMO. However, the number of banks participating in the treasury bill bidding and repos has decreased.
• Overnight interest rate rose again after falling in the middle of the week, along with a high average daily trading volume, more than VND53.7 Tn
• This week, State Treasury offerred an amount of 5.5 Tn dong but issued only 200 Bn dong. There were no issuance on the two main tenors, 10 and 15 years. The lowest-bid interest rates was higher than the yield in both tenors. The bid-to-cover ratio has, recently, declined as the yield remains low
• In terms of exchange rates, most indexes fell except for the central exchange rate which still increased by 4 dong from the beginning of the week. The bank exchange rate decreased by 3 dong, while the SBV's buying exchange did not change
• Outlook: We realize that liquidity in the interbank market is no longer abundant while many banks are still in high demand. Banks will borrow mainly on interbank as the interbank interest rate is still in range of 3-4.75%.

HAX – 2019 AGM Update

In 2018, HAX recorded a 16% increase of NPAT, which benefited from the shortage of cars in the auto market. Turning to 2019, we believe that car distribution activity of the company will be more challenging as competition in the market is forecasted to be fiercer.

Demand – supply overview and the oil forecast in 2019

With the narrowing of the supply-demand gap compared to the end of 2018, the oil price is forecasted to continue going well until OPEC + has made any new decision for their cut.

Fed’s movement impacts on other central banks

• The Fed has, recently, announced a pause on interest rate hike and an intention to slow the reduction of its holdings of Treasury securities in May and to end the reduction program in September.
• Other central banks would likely to remain their current monetary policies.
• Fed adjusted US GDP growth rate for 2019 to 2.1% from 2.3% in December meeting.