VSH – Operating Thuong Kon Tum, finally!

VSH’s 2019 performance was not good due to the poor hydrology conditions. The problem continued throughout 1Q and 2Q2020 as both Vinh Son and Song Hinh HPP saw output decreasing by 50% YoY. VSH’s output was merely enough for Qc and it only sold 5% of its output on the CGM. VSH expects 3Q2020 to continue to be lower YoY in terms of Vinh Son and Song Hinh HPP’ performance. Thuong Kon Tum HPP is scheduled to start operation in late-August and contribute significantly to VSH’s output but not net income.

DIG update: The Gateway project to drive its earnings in 2020

DIG is a real estate company that owns a large and valuable land bank, focusing mainly in tier-2 cities like Vung Tau, Dong Nai and Vinh Phuc. The company's current valuation is looking quite attractive, with a current P/B of only 0.9 times. However, the short-term growth drivers are not really clear, as delays slow down the implementation of key projects in Dong Nai province. The company has set a profit target VND 520 billion for 2020, resulting in a forward 2020 P/E of 7.2 times. Our current valuation for DIG is VND 17,700/share, equivalent to a 44% return. We will update the valuation based on the latest updates in the next quarter.

MBB – 2020 AGM updates

MBB is likely to undergo a pressure as the plan of restructuring bank loans and MCredit coincides with the Covid-19 situation, which hurts the consolidated bank’s near-term outlook. We think that in 2020 MBB would maintain a low (even negative) earnings growth to prioritize the handling of its current restructuring progress and virus-impacted loans, while trying to build a better position for higher growth since 2021 onwards.

The stock is currently trading at VND 16,900, equivalent to a trailing PB of 1.0x, which is quite low versus peers. However, considering current headwinds, we recommend watching the bank’s performance in the next quarters to see how much the situation could improve. A more detailed analysis will be provided upon the publication of 2Q financial statements.

ACV - AGM note: Timing to reopen international markets remains uncertain. Review of FY20 forecasts pending.

We attended ACV’s 2020 AGM last Friday in which all the proposals submitted were approved owing to the agreement of a distinct majority of shareholders including the Commission for the Management of State Capital at Enterprises (CMSC), representing 95.4% of total shares outstanding. In the AGM, ACV shared a more negative view on the FY20 outlook compared to our previous forecast in May as the second wave of covid-19 hits many key international markets. As such, we are reviewing FY20 financial forecasts as well as the target price (current TP of VND 65,000).

Will Economists Revise Their Forecasts?

The world is broadly reopening as people start losing their tempers with shelter-in-place orders even with non-stop increases in new cases of COVID-19. Economic activities are back to a ‘new normal’ and the market pays heavy attention to the early post-lockdown statistics. Interestingly, more and more preliminary economic data have beaten economists’ forecasts which reflected deeply pessimistic views on the outlook. While manufacturing is slightly below the positive territory, service providers are more optimistic about residents’ potential consumption caused by forced savings and generous stimulus.

Steel Production and Consumption in 5M2020

In 5M2020, the domestic steel consumption and construction industry were hit strongly by COVID-19. The government’s measures to control the pandemic, including travel restriction on people and goods, social distancing, and the disruption in the international supply chain affected negatively steel production and consumption. The construction industry grew at a pace of 4.4% in 3M2020, significantly lower than the pace of 9.2% in 2019. Meanwhile, domestic consumption of construction steel and steel pipes fell by 9.2% and 10.1%, respectively. Noticeably, the domestic consumption of coated steel still grew by 4.5%.

GMD - AGM note: Economy recession concerns cloud FY20 Outlook; Maintain TP

The FY20-21 outlook for GMD remains subdued as 1) the pandemic and its prolonged impacts will drag heavily on the cargo volume throughput, 2) the rise in competition in Hai Phong will likely further squeeze port operations’ profit margins while 3) the loss of Gemalink will be the key factor to follow closely next year.

Indexes' review for July 2020

Based on the data as of June 18, 2020, we forecast that BVH and CTD may be eliminated from the VN30 basket during this review period. While BVH could be eliminated due to freeloat requirements while CTD because the 12-month average market capitalization slipped out of the top 40 stocks. By contrast, VN30 could add KDH and GEX, but the rules for adding new components are not so clear. For VNFinlead Index, no stocks will be added while only BVH will be deleted due to freefloat requirements. VNDiamond basket will not change index components in July but it will do so in the October review.

In short, we notice that ROS (10.7 mn shares), EIB (3.5 mn), GEX (3.5 mn), and KDH (2.6 mn) are among the top buying stocks by domestic ETFs in this review period. Meanwhile CTG (3.2 mn), HPG (3.1 mn), STB (2.4 mn) and VPB (1.6 mn) will be sold the most.

DPM - Update 2Q2020 - Unexpected earnings growth

Despite strong earnings growth in 2Q2020 as well as full-year 2020, we maintain the opinion that DPM is only seen as a dividend player and not a growing company. So we prefer the dividend yield when buying this stock. With the possible cash dividend of VND1,200 to VND1,500, the dividend yield at this market price ranges from 7.8% - 9.7%. Besides, we raise the target price from  VND13,600 to VND14,940 as the net profit is much higher than our previous forecast and maintain our NEUTRAL call for this stock

Comparing frontier and emerging equity markets

Assets under management in the so-called “frontier” asset class have collapsed to only about USD 5bn currently, after peaking at around USD 50bn in 2014. This collapse in assets under management, with many frontier funds now being closed, has coincided with a collapse in valuations which is why it makes sense for those with a long-term view to invest today in tomorrow’s emerging markets. The total size of the emerging market asset class is, by contrast, over USD 4 trillion. As for performance (Figures 1 and 2), the MSCI Frontier Markets Index has declined by 23% in USD terms since January 2020 while the MSCI Emerging Markets Index is down 13%. The Frontier Index was launched in December 2007 and has since fallen by 53% in USD terms, compared with a 15% decline in the MSCI Emerging Markets Index.