VSC – Q3-2020 Update: Recovery process

VSC announced its Q3-2020 results with the visible recovery process compared to the previous quarter. Total revenue reached VND 429 billion (-6% YoY, + 9% QoQ). Operating profit and EBT recovered, reaching VND 81 billion (-6% YoY, + 16% QoQ) and VND 86 billion (+1% YoY, +17% QoQ), respectively. Accumulated 9M-2020, net income increased by 20% YoY compared to the low of FY2019.

Fertilizer Industry – New VAT Policy: Benefits are not for everybody

The Ministry of Finance has proposed to the government the draft of the amendment to Tax Law No. 71, in which fertilizer is changed from being not liable to a value-added tax (VAT) to become liable to a VAT of 5%. The draft is going to be discussed and ratified in the ongoing Session 10, National Assembly XIV. If ratified, the new law will come into effect on January 1^st, 2021. We expect the new policy to be a historical breakthrough for the industry, enhancing domestic companies’ competitiveness with imported fertilizer to support a sustainable growth. However, not all companies could benefit from the new policy. It will depend on their types of business and products.

FPT Q3-2020 AM: Growth decelerated due to subdued backlog value signed in the 1H-2020

FPT’s revenue grew by 6%, amounting to VND 7,553 bn, while NPAT went flat at VND 929 bn in Q3-2020. Accumulated 9M-2020, PBT was generally in-line with our estimate, reaching VND 3,814 bn (+9% YoY) and completing 75% of our full-year forecast.

TCB - In hope of robust growth in the next quarter

We expect TCB to maintain good results in Q4 and look forward to solid earnings growth in 2021. In 9M the bank had moderate credit growth, compared to the “room” given by SBV. However, growth in income was still robust. TCB also took prudent action to write off bad debts and record extensive provision expenses. This will relieve some pressure on NPL and LLR, in precaution for probable bad debt formation in the Q4. We think TCB will be resilient to this crisis and be able to recover strongly upon the end of the pandemic.

STK – 3Q2020 Update: Recovery better than expected

The strategy of focusing on recycled yarn continues to prove its efficiency amid the adverse effects of the pandemic. Given the better-than-expected recovery of the yarn demand in 3Q2020, especially recycled yarn that has been backed up by the accelerating “green-lifestyle” post-pandemic, we revise up our target price for STK from VND 15,600/share to VND 18,700/share. With an expected cash dividend of VND 1,500/share in the next 12 months, the total return is 14%. We recommend to ACCUMULATE this stock.

Highlights from the year-end meeting of the National Assembly

The 10^th session of the 14^th tenure of the National Assembly (NA) opened on 20 Oct 2020 and is scheduled to last for more than three weeks until 17 Nov 2020. As usual, the year-end meeting will focus on reviewing socio-economic development in 2020 then the NA will decide important matters related to socio-economic issues and the state budget for the next year. The main points of the reports that have been submitted to the NA can be summarized as follows:

VTP – Viettel Group’s divestment and VTP’s competitive advantage assessment

HNX announced  that on November 11^st, 2020, around five million shares of VTP will be publicly auctioned on HNX with a starting price of VND 105,500 per share, up from the previous starting price of VND 104,800 per share. Thus, the divestment rate is 6% of VTP's charter capital, equivalent to the total starting value of about VND 530 billion. We believe that Viettel Group's divestment would attract little attention from potential strategic investors due to its relatively low divestment rate and lack of information about next phase of Viettel Group’s divestment.

High service coverage with extensive postal network reaching rural areas is the core competitive advantage of VTP in providing traditional delivery service. However, for e-commerce last-mile delivery service in Hanoi and Ho Chi Minh City, VTP is losing its market share to start-up companies.

We appreciate VTP's strategy of focusing on fulfillment technology instead of developing their warehouses network and participating in burn-money race in providing delivery service for e-commerce companies. 

VPB – 9M2020 – Growth led by the parent bank

VPB achieved a 30% PBT YoY growth in 9M2020 (+15% normalized), with mostly flat YoY earnings in 3Q upon downside impact from the virus. The 9M growth was predominantly led by the parent bank, who’s normalized 9M profits (excluding dividend income and VAMC provision) expanded by 32% YoY. Meanwhile, FE Credit is estimated to shrink by 9% YTD due to impacted NII, fee income and asset quality. This is pretty much in line with expectations, though.

Our current target price for VPB is VND27,000, equivalent to an 11% upside compared to the current market price. This translates to an ACCUMULATE recommendation. We will have more detailed forecasts and revised target price (if any) in subsequent reports upon VPB’s earnings call this early November.

PNJ Q3-2020 Results Track Our Forecast

PNJ announced Q3-2020 with flat growth in revenue while NPAT slightly declined by -2.8% YoY. Although accumulated 9M-2020 revenue and NPAT have fulfilled 75% and 72% of our 2020 forecast respectively, these results were rather in line with our full-year estimate as Q4, besides Q1, is often a high season for the jewelry business. We are currently review 2020 forecast with revenue of VND15,470 (-9.0% YoY), net profit of VND896 (-24.7% YoY) together with 2021 forecast with revenue of VND18,547 (+19.9% YoY), net profit of VND1,115 (+24.4% YoY). Our current target price is VND73,000, equivalent to a 2020/21 P/E of 18.4x/14.8x, and is under review.

MPC – The US Finds That MSeafood Evaded Anti-Dumping Payments

After more than a year of receiving an allegation from a domestic shrimp manufacturer, CBP on October 13, 2020 officially concluded that MSeafood committed origin fraud in order to evade anti-dumping (AD) duty. Facing this unfavorable decision, Minh Phu announced that it would appeal. In terms of business performance, we have found that the firm's competitiveness in the US has shown signs of decline and we are also concerned about the progress of implementing new farming technology, which will determine the growth of the company in the future. In 2020, profit may grow strongly but it is possible that the company could not complete the year plan. We will continue to monitor this case and update on new developments. Recommendation: MONITOR.

MSCI: Expectations from capital flows into Frontier Markets

The recent information from MSCI about capital flows attracted the attention of investors. More specifically, Vietnam is assessed as the country that will benefit the most from the reclassification of the MSCI Frontier Markets Index in November. Kuwait has been upgraded to Emerging Market status. Vietnam could see a weight increase of 13% in the Frontier Markets Index to become the most important market in this Index. However, MSCI has just suggested a gradual weight reduction for Kuwait at the rate of once per quarter and lasting for a year, starting in November 2020. If so, instead of reducing Kuwait’s to 0% and rebalancing the weights of other countries in the MSCI Frontier Markets 100 Index in November, this could take longer than expected.

In our opinion, capital would flow into stocks in the VN30 Index, especially Vietnamese stocks accounting for a large proportion in MSCI. In particular, net money inflows is estimated at USD 63 million with stocks having the largest money flows: VNM (USD 9.5 million), VIC (USD 9.3 million), VHM (USD 8.7 million), HPG (USD 5.7 million), and VCB (USD 4.5 million). However, the value of capital inflows could be higher than our estimate because we have not counted active funds and other funds benchmarking this index.