Steel material market movement in April 2023

• Iron ore and coking coal prices retrace as the global market lacks supportive news.
• Vietnamese domestic steel scrap remains high because of favorable macroeconomic factors.

VPB – Aggressive guideline for 2023 post the agreement of private placement

• In 2022, the PBT of the consolidated group and parent bank were VND 21.2 tn (or USD 899 mn, +45.5% YoY) and VND 24 tn (or USD 1bn, -36.8% YoY), respectively. Excluding one-off income from divesting FC in 2021 and Banca upfront-fee in 2022, PBT’s parent bank grew +32% YoY. Adversely, consumer finance was severely impacted by the slowdown of the economy, resulting in a loss of roughly VND 2.5 tn per our estimation.
• VPB announced an agreement with SMBC on a 15% private placement deal, equivalent to a deal size of VND 35.9 tn (or USD 1.5 bn). The deal is expected to be done within Q2 or Q3 2023 per the Bank. With the strategic participation of SMBC, VPB has climbed to the top 1 largest bank in terms of equity capital (VND 140 bn, based on the financial statement at the end of 2022). Post the deal, CAR is expected to surge more than 300 bps to reach 19%. Such thick Tier 1 capital will build a solid foundation for the Bank to sustain its long-term growth.
• VPB has planned its 2023 PBT to grow 13% YoY, implying a growth of 53% in core income sources (excluding upfront fees in 2022). Despite the joining of SMBC, we think VPB’s 2023 guidance is challenging given the current weak economic outlook. Pressure on the bank’s plan will come from low credit demand and high credit cost. Conservatively, we forecast its PBT for 2023-2024 at VND   20,944 (or USD 887mn, -1.3%) and VND 31,131 bn (or USD 1.3 bn, +49%), respectively. Correspondent book value will be VND 18,700 and 20,400, respectively. We will re-evaluate our forecast when seeing signs of economic recovery.
• Poor economic outlook and weak market sentiment have put pressure on the bank’s market price, making its stock come to an attractive valuation compared to peers’. Our current target price is VND 26,000/share, offering an upside of 24% from the closing price of April 7th, 2023. Therefore, we believe that VPB is among the banking stocks that long-term investors can consider picking for your portfolio in the deep correction session.

DBD – A cautious business plan despite impressive growth in 2M2023

• In 2M2023, net revenue and PBT were VND 238 billion (+13% YoY) and VND 42 billion (+25% YoY) respectively, completing 13% and 12% of our forecast.
• The plan for 2023, revenue and PBT are VND 1,800 billion VND and VND 300 billion respectively, an increase of 11% and 0% compared to the results in 2022.
• After completing the Nhon Hoi anti-cancer drug factory, DBD continues to invest in two new factories, namely sterile drugs and OSD – Non – Betalactam with a total investment of VND 840 billion VND and VND 822 billion, respectively. Funding for the project comes from a separate issuance to strategic shareholders and loans.
• We adjusted the projection for 2023 to net revenue and NPAT of VND 1,725 billion (+12% YoY) and VND 292 billion (+20% YoY), of which ETC and OTC channel revenue are VND 947 billion (+11% YoY) and VND 649 billion (+12% YoY) respectively. EPS for 2023 is 3,894 VND (+20% YoY). We maintain a buy recommendation on DBD shares with a target price of 52,600 VND/share, which is equivalent to a forward P/E valuation of 13.5x.

Tax incentives do not really have a significant impact on attracting FDI

• Under an agreement (come into force from 2024), between 136 countries and territories (including Vietnam) and the Organization for Economic Cooperation and Development (OECD) on a minimum tax on income businesses in most countries of the world (1) Countries, where the products and services of large multinationals are used, may tax the profits earned, even if these companies have no headquarter/office in that country and (2) Apply a minimum global corporate income tax (CIT) rate of 15% on the foreign income of the companies.
• Compared to the OECD minimum tax rate, the preferential tax rate in the first 10 years of investment in Vietnam will be 7.7% or 4.8% lower, depending on the performance of the FDI enterprise in the year of operation. Firstly. This leads to opinions that Vietnam will lose its competitive advantage when attracting FDI.
• According to our research, (1) Growth and expansion of the market, thereby increasing the value of benefits for shareholders is the top priority of the company, (2) Stable economic and political environment, clear legal framework and simple administrative procedures are the top priority factors in choosing an investment destination, (3) tax incentives will be put on the list andnegotiating table to make the final decision when there is more than one potential location to maximize the project investment efficiency. Thus, tax incentives are not the most important factor affecting the choice of investment destination.
• Finally, tax incentives are a tool to create competition among developing countries to attract FDI as a growth engine. However, this competition in the ASEAN region does not make a difference in tax rates after applying relatively preferential policies and the distribution of FDI flows to countries in the region has not changed much over the years.

REE – AGM note: Flat earnings growth guidance reflects a mixed outlook for FY2023

We attend REE’s 2023 annual general meeting (AGM) in HCMC. Our key takeaways are as follows.

• Management guides for 2023 revenue of VND 10,962 bn/ USD 470mn (+17% YoY) and NPAT-MI of VND 2,700 bn/ USD 115 mn (+0.3% YoY). The 2023 profit plan is flat mainly due to the less positive growth prospect of the energy segment, while the residential real estate segment is expected to grow strongly (+539% YoY).
• REE expects the energy segment to contribute 50% to 2023 NPAT-MI, reaching VND 1,351 bn/ USD 58 mn (-19% YoY compared to a 2022 high base), mainly due to the hydropower sector's less optimistic outlook. In 2023, REE Energy also targets to develop an additional 100 MW capacity through M&A activities.
• Office leasing segment is projected to contribute 19% to 2023 NPT-MI, totaling VND 525 bn/ USD 22 mn (+2% YoY). The upcoming Etown 6 office building is also a driver in 2024, which will be launched in 4Q23.
• Real estate segment is expected to contribute 15% to 2023 NPAT-MI, amounting to VND 405 bn/ USD 17 mn (+539% YoY). REE Land targets to sell 100% low-rise housing products of Bo Xuyen project during the year.
• Water & Environmental services segment is forecasted to contribute 12% to 2023 NPAT- MI, recording VND 335 bn/ USD 14 mn (-1% YoY), demonstrating a stable performance.
• REE expects M&E services segment to contribute 6% to 2023 NPAT-MI, recording VND 160 bn (+20% YoY)/ USD 7 mn with flat gross margin. Public spending, FDI production expansion, and the recovery of the hospitality sector are the key drivers for this segment.
• Shareholders approved REE’s FY2022 dividend proposal for a 15% stock dividend and 10% cash dividend (equivalent to a 1.5% dividend yield).

BFC – Expecting a high dividend yield at this current market price

• BFC achieved net revenue of VND1,894 bn in 4Q2022, flat compared to the same period last year. Sales volume was down 27.7% despite the peak season. Selling price increased sharply by 42.1%. 4Q2022 gross margin reached 8.8% - relatively low compared to average and NPATMI in 4Q2022 decreased by 79.7% to VND 16 bn. For the 2022, the company's net revenue reached VND 8,581 bn and NPATMI was VND 141 bn.
• Fertilizer prices maintained a high price level in 2022, affecting the sales volume. Given the current cooling down in fertilizer prices, we believe that the company's consumption volume will improve in 2023 and gross margin may increase slightly when input material prices are not volatile.
• After benefiting from the uptrend of fertilizer prices, the business of BFC will turn to normal and is considered as a cash dividend player. We think the company can maintain a cash dividend of VND1,500/share this year and next year. At the current stock price, the dividend yield is at 9%. Recently, BFC has submitted a dividend payment plan of VND 2,000/share for 2022, of which BFC paid 600 VND/share in advance. We believe that investors can ACCUMULATE BFC shares at this price to enjoy an attractive cash dividend. Regarding the business results of 2023, we forecast that BFC can achieve VND 6,952 bn in revenue and VND 155 bn in NPATMI. EPS 2023 is estimated at 2,441 VND/share.

STK – AGM note: 2023 guidance maintained, 1Q23 took a hit but story unchanged

We attended STK’s 2023 annual general meeting (AGM) in HCMC on Mar 30th. Our key takeaways are as follows.

• STK has pre-released its 1Q23 results with revenue of VND 270 bn/ USD 11.5 mn (-37% QoQ, -58% YoY) and NPAT of VND around 3 bn/ USD 0.13 mn (~ -93% QoQ, ~ -96% YoY). The preliminary 1Q23 results were weaker-than-expected but not surprised us when brand’s orders declined on destocking cycle.
• For FY2023, management keeps a conservative single-digit revenue (+1.6% YoY) and NPAT (+4.5% YoY) growth target as 1H23 sales momentum might stay mute due to brand’s inventory adjustment admits a poor demand outlook. Nevertheless, the outlook for orders might turn more positive in 2H23 (knitted orders for the fall/winter collection need a larger yarn volume than woven orders for spring/summer collection).
• Shareholders approved STK's proposal to not pay cash dividends for the FY 2022, instead a 15% stock dividend as the Unitex project is still in its investment phase. The time of issuance will be when approved by the State Securities Commission.
• Mid & long-term growth is driven by Unitex project. The Unitex project aims to increase STK’s total capacity to 60,000 tons/annum (phase 1: 36,000 tons; phase 2: 24,000 tons). Phase I of the project (with a capacity of 36,000 tons per year) is expected to begin official production starting in 1Q24.

We maintain our forecasts and a BUY rating with the one-year target price of VND 32,500/share. It implies a return of 22%, based on the closing price of Mar 31th, 2023.

MBB – Growth momentum is going to slow down amidst economic uncertainties

• 4Q22 results witnessed a top-line growth of 16% YoY as the core income source sustained its momentum to reach VND 9.6 tn (or USD 0.4 bn), up by 34% YoY and accounted for 79% of total operating income. NFI declined 9% YoY to VND 1.2 tn (or USD 50mn). Despite the decline of 28% YoY in non-interest income growth, MBB recorded total operating income of VND 11.8 tn (or USD 490mn, 16% YoY) in 4Q22, favorably contributing to the bottom-line growth. On top of that, credit cost was the most notable factor dragging down PBT as provision expenses surged by 78% YoY. Altogether, PBT was down by 2% YoY in 4Q22, landing at VND 4.5 tn (or USD 189mn).
• The forecast of NPAT for 2023-2024 are VND 19,904(or USD 829mn, +14%) and VND 24,967 bn (or USD 1 bn, +25%), respectively.  The book value will be 20,600 and 25,000, respectively. We see valuation pressure coming from the weak market sentiment and probability of non-performing loan formation yet the stock has come to attractive valuation.
• In the long run, as the bank’s core advantages on the interest income front regarding high yields and low costs of funds remain, coupled with potential from fee income sources including bancassurance and consumer finance segment, we expect MBB to return to its growth trajectory by riding on affordable funding costs when market conditions become more favorable in 2024. Our current target price is VND 22,000/share, offering an upside of 20% from the closing price of March 30th, 2023, hence we recommend to BUY this stock.

MSN – Valuation becomes attractive

• In Q4 2022, Masan Group (HSX: MSN) posted net sales and NPAT-MI of VND20,643 bn (+5.7% QoQ; -13.4% YoY) and VND447 bn (-17.7% QoQ; -93.1% YoY), respectively. Amid a challenging macro envinronment, the positive quartely growth, which was driven by MCH, MML and MHT, is an outstanding performance compared to other consumer giants.
• To sum up, 2022 net sales and NPAT-MI of MSN were VND76,189 bn (-14% YoY) and VND3,567 bn (-58.3% YoY), respectively. Notably, we found some warning signals from the downward trend of MHT ‘s gross margin between Q4 2021 and Q4 2022. We believe that the advantage of rising Vonfram prices is disappearing because China re-opened, resulting in lower MHT’s expected gross margin.
• We expect that 2023 revenue will maintain a modest positive growth, supported by the growth of consumer-based businesses. However, the bottom-line is predicted to drop by double-digit rate due to heavy interest expenses. Consequently, 2023 sales and NPAT-MI is predicted to be VND81,902 bn (+7.4% YoY) and 2,451 bn (-31.3% YoY), respectively. 2023 EPS is calculated at VND2,088 (-16.8% YoY). 
• Because our forecast does not change, based on SoTP valuation, we maintain a target price of VND101,400 per share, compared to our previous target price in Jan-2023. We recommend to BUY MSN shares for long-term investment with the 12-months total expected return of +28.7% compared to the closing price of VND78,800 on Mar 29th 2023.

The recovery trend of Chinese tourists to Vietnam is inevitable in 2023

• China’s Ministry of Culture and Tourism released a second list of 40 new countries, including Vietnam, for group and package travel on March 10th, bringing the total destinations where Chinese travel agencies can sell group tours to 60.
• For those countries that are eligible for China’s group tour from Feb 6th, namely Thailand, Singapore and Philippines, inbound arrivals from Chinese tourists witnessed a markedly accelerated pace in February compared to previous month.
• We believe that the recovery trend of Chinese tourists to Vietnam is inevitable in 2023. Our baseline scenario estimates Chinese tourist arrivals could reach 20% of 2019 levels in 2023, slightly lower than recovery pace of South Korea tourist arrivals in 2022 since the difference in visa waiver policy, resulting in 1 million Chinese travelers.

Update on monetary market in March 2023

• Liquidity is still abundant, the SBV stops withdrawing money for 91-day term.
• Lower interest rates will help improve credit growth.
• Impact of Fed rate hike in March meeting

Pharmaceutical industry - Ministry of Health issues policies to guide the ETC channel development

• The Ministry of Health issues legal documents to help alleviate drug shortages and facilitate long-term growth in the ETC channel.
• The market share of OTC channels may shrink as the ETC channel has been recovering from the end of 2022. In the first two months of the year, retail pharmacy chains such as Pharmacy or An Khang closed some stores which were operated ineffectively.
• Pharmaceutical companies with long-term orientation on ETC channels such as DBD with cancer treatment and IMP with antibiotic segments will benefit from the supportive policies of the Ministry of Health.