Headwind for US shale oil?

After the OPEC+ meeting in March 2020, no agreement was approved, leading to a breakup of talks between OPEC and its allies. Saudi Arabia cut the selling price and increased the production volume from 9.2 mbpd to 10 mbpd. As a result, oil prices have plummeted to the lowest level in the past five years. Once again, the US shale oil industry is under pressure as the current oil price is below the breakeven point of many companies.

Automobile industry - Update on the first two months of 2020

We expect that the results of automobile companies in 2020 will not be positive due to two reasons, including (1) the Covid-19 pandemic has negatively affected the economy so demand will decline, (2) high competition because of oversupply and the burden of liquidating inventories leading to lower selling prices. Consequently, revenues will be strongly affected in the first half of the year but are expected to recover in the second half. Furthermore, companies have to spend more money on selling activities and discounts, that will make gross profit margin (GPM) narrowed compared to the GPM of 2019.

2020 will be a tough year of the automobile industry.

MWG – 2020 prospects given the Covid-19 outbreak

Same store sales growth in TGDD and DMX will be negatively hit in Q2/2020 and will remain so until the virus outbreak is put under control, especially in Hanoi and HCMC – the 2 biggest markets where more than 20% of MWG’s stores are located. Even though the online channel will offset partly the sales loss from the offline channel, customers in major cities may find alternatives in other ecommerce websites which offer price discount while MWG’s online advantage from the large store coverage is only significant in those areas that ecommerce can’t reach. Moreover, the Euro championship delay to 2021 will also be a lost opportunity for MWG’s TV sales.

PC1 – Fundamentals can remain mostly stable during the pandemic

2019 business results were driven by the backlog in the electricity construction

PC1’s 2019 revenue came at VND 5,842 billion (+15% yoy). The construction and manufacturing segments revenue grew by 73% and 97% yoy respectively because of the abundant backlog maintained throughout the year. 2019 was a peak year in terms of disbursement in the power industry, particularly in the solar power segment. PC1 won numerous bid as EPC. Its manufacturing segment also increased strongly. The two growth drivers compensated for the drop in the real estate revenue because of no handovers during the year and electricity generation’s flat revenue.

BVH – Update on 2019 results

In 2019, Circular 01 has made a positive impact on BVH's insurance business. However, overall profit fell slightly due to the gloomy stock market. The COVID-19 pandemic, if prolongs, may adversely affect the operation of both insurance and investment businesses. Although the company has received additional capital from Sumitomo, the amount of new capital is relatively small, while the Ministry of Finance has not shown any moves related to reducing its ownership in BVH, the growth of insurance premiums in coming years may be difficult to maintain high rates as the period 2015-2018.

VN30 review in April 2020

The Ho Chi Minh City Stock Exchange will review the VN30 basket in April and make adjustments on the first Monday of May. According to statistics of Rong Viet, the weights of average 12-month freefloat market capitalization of stocks in the basket of VN30 is much different from the current weights. Accordingly, we estimate that weights of ROS, VRE, POW and SSI will be increased while weights of VPB, STB and FPT will be reduced in the VN30 basket. Currently VFVN30 ETF is the largest fund that is mimicking the VN30 index. Therefore, these stocks that will be bought / sold the most in the upcoming portfolio rebalancing.

PHR - Results in 2020 depend heavily on land transfers

In 2020, the company estimated the parent company's revenue to reach VND 2,460 billion, up 52% ​​YoY and the profit before tax of VND 1,148 billion, up 115% YoY. We believe that the planned profit in 2020 is achievable as the legal issues of the land handover from PHR to NTC has been solved, so that the company is likely to receive and book fully VND 865 billion from NTC. We expect that in the future, the land transfer to VSIP will also be completed, from which the compensation money of VND 898 billion will be booked in 2021.

PNJ – Conservative target for 2020 due to the Covid crisis

In the AGM documents just published, PNJ set an unsurprisingly conservative target for this year: 12% growth in revenue and 13% growth in PAT. This is in the context that the Covid crisis will significantly hit jewelries retailers as shoppers are staying away from public places to avoid infection, while also limiting their spending in consumer discretionary like jewelries.

Gross margin is expected to be flat in 2020, even though it has been improving significantly in recent years (+520 bps in the last 4 years and +130 bps in 2019) due to increase in retail jewelry contribution and higher margin items. We believe that is because of the increasing expansion into Tier 2 and Northern regions which have different consumer behavior. PNJ plans to open 31 new stores in 2020, the same pace as 2019 (32 new stores).

Update on Global GDP Growth – Slowdown/Recession/Crisis

In the past few days, there have been social and economic upheavals due to the coronavirus outbreak outside China. The endless increase in cases and death forces policy makers to hold emergency meetings which are highlighted by sharp interest rate cuts and the restart of quantitative easing. However, markets are shaky and negatively responding to the out-of-expected level of rate cuts. The most important question is whether the world will suffer an economic slowdown, recession or in the worst case a crisis.

HDB - Results Update Report 4Q2019

We note that HDB has achieved a better-than-expected interest income expansion thanks to impressive NIM improvement in 2019, but also hold the view that the contribution from service and other income to operating income should be more visible. For 2020-2021, we expect that interest income momentum would remain decent while service income would escalate due to the boost of bancassurance activities. On top of that, both operating expenses and provision charges should be well under control, supporting a stable earnings growth in the longer term.

HDB is currently trading at VND 21,300, equivalent to an attractive 2020f PBR of 0.9x considering the potential earnings growth and ROE of roughly 20% in the next five years. With a lower forecast of 2020 credit growth and NIM, and a higher forecast of provision cost (than they were in our 2020 Strategic report) due to potential impact of the virus epidemic, we reduce HDB’s target price to VND 29,000. This is still equivalent to a potential upside of 36% from the closing price of 18^th Mar 2020, thereby upgrading the stock to a BUY recommendation.

BID – Update on 2019 Business Performance and 2020 AGM

The bank has set a moderate earnings growth target of 16.4% in 2020, with the plan to finish its restructuring within this year as well as investing more resources on core banking and digital projects. We hold our positive view on BID’s outlook in medium term based on a stronger capital adequacy coupled with the clearance of legacy bad debts and the support from strategic partner. We forecast NPAT CAGR to reach 30% in 2020 – 2022 and ROE to approach 20% in the next three years.

Considering the possible negative impacts from the virus epidemic in this year, we reduce credit growth forecast by 2ppt and NIM forecast by 5bps, thereby revise down BID’s target price to VND 45,000. This is equivalent to a potential upside of 33% from the closing price of 17^th Mar 2020, reiterating our BUY recommendation. Downside risk includes the stronger-than-expected impacts on credit growth, NIM and asset quality due to the epidemic. Upside risk includes one-off earnings from BIDV MetLife divestment and exclusive bancassurance agreement.