Vietnam – Daily Market Recap Oct 30 – VRE & PVT

Dear Valued Clients,

We would like to send you our Daily Market Recap for today

Market Commentary: The VN-INDEX rose 0.7%, ending its losing streak

The VN-INDEX closed up 0.7% at 925.5pts on the back of large caps support while the Financials sector stocks showed weak performance. At the opening bell, the VN-INDEX had mixed performance and stayed nearly flat with many large caps fluctuating. Notably, VIC became the largest mover, rising 5.8% to VND106,500, contributing 5.5pts to the index’s gain. Other large caps also joined the rally, including GVR (+3.3%), VNM (+1.0%) and MWG (+2.3%). On the other hand, Financials stocks continued to have a disappointing session, led by VCB (-0.7%), TCB (-2.1%), and BID (-0.4%), dragging the index by 1.3pts. Later, the index closed near its intraday high at 926.3pts (+0.7%), managed to stay in the green territory with today’s movers. At the end of the session, the VN-INDEX rose 0.7% to 925.5pts. The HNX-INDEX also edged up 0.7% to 135.3pts.

Real Estate (+2.3%), Consumer Discretionary (+2.0%), and Energy (+1.5%) rose, while Utilities (-0.6%) and Financials (-0.4%) lost ground today. Top index movers included VIC (+5.8%), VNM (+1.0%), GVR (+3.3%), MWG (+2.4%), and PLX (+1.7%). Top index laggards consisted of VCB (-0.7%), TCB (-2.1%), GAS (-0.9%), VRE (-1.2%), and VHM (-0.3%). Top three major put-through transactions were EIB with 7.4m shares (VND129.8bn), VIC with 0.9m shares (VND96.5bn), and PNJ with 0.4m shares (VND27.3bn).

Foreigners net sold on HOSE to the amount of VND567.5bn, while net bought on HNX to the amount of VND1bn. They mainly bought VIC (VND127.7bn), VNM (VND69.5bn), and HPG (VND67.2bn); and mainly sold MSN (VND234.6bn), VNM (VND151.7bn), and VIC (VND134.3bn).

Market News

Oil set for worst month since March as virus revival cuts travel

Oil is poised for the biggest monthly slide since March on concern a resurgent pandemic in the U.S. and Europe will keep people hunkered down, crimping demand for auto and aviation fuel. Futures have tumbled almost 11% this month in New York and they’re near the lowest since late May in London. Infections surged to a record in the U.S. Midwest, while parts of Europe tightened restrictions to stem second waves. Meanwhile, the return of Libyan supplies added to concerns of a crude glut. (Bloomberg)

Promoting Vietnam’s economics growth via public investment

The government has proposed a strong 5-year increase in public investment to achieve high economic growth, with more opportunities for private investors to join. Assigned by the government, Minister of Planning and Investment Nguyen Chi Dung last week reported to the National Assembly (NA) that the government has just fixed the VND2.75q (US$119.56bn) public investment budget for 2021-2025, which will be adopted by the NA. The total sum will include VND1.38q (US$60bn) for the central budget, covering VND300tr (over US$13bn) in foreign capital, and VND1.08q (US$46.96bn) in domestic capital, while localities will be allocated VND1.37q (US$59.56bn). The budget will be far larger than in 2016-2020 when it was VND2q (US$86.95bn), including VND1.12q (US$48.69bn) for the central budget (VND300tr [over US$13bn] in foreign capital and VND820tr [US$35.65bn] in domestic capital) as well as VND880tr (US$38.26bn) for localities.

According to the MPI, over the next five years, the new funds, in addition to capital from private domestic and foreign investors, will help to complete the construction projects of the eastern cluster of the North-South Expressway, the national coastal road line, connection roads, airports, and seaports. The three projects include Mai Son-National Highway No.45 (63.4km), Vinh Hao-Phan Thiet (106km), and Phan Thiet-Dau Giay (98km). The state will pour an additional VND23.46 trillion (over $1 billion) into these projects. According to the committee, these three projects, which are already under way, are of great importance and urgency for investment due to rising traffic demand. All of them had been planned for investment under the public-private partnership form. At a macro level, new public investment will also help the country to hit the GDP growth target of 6.5-7% annually in 2021-2025. These rates are mentioned in the MPI’s draft Socioeconomic Development Plan for 2021-2025, under which by 2025, the per capita income will be $4,700-5,000, the GDP ratio of the manufacturing industry will be over 25% and digital economy will be 20%. The draft will have to be submitted to the government before being tabled at the NA. (Vietnamnet.vn)

Coverage Universe Update

Vincom Retail JSC (VRE) – Earnings Flash – ADD (+48.4%)

Stay tuned for a bounce-back in 4Q20F

3Q20 results: recovery on track

• VRE recorded a 3Q20 revenue of VND1,760bn (-20.3% yoy; +8.0% qoq) and a 3Q20 net profit of VND572bn (-20.1% yoy, +66.8% qoq)
• Leasing revenue slid 11% on a yoy basis but surged 23% on a qoq basis to VND1,607bn. We estimate that average rental price dropped 9% yoy, but improved 23% qoq, as VRE scaled down the value of its supporting package for tenants to VND145bn in 3Q20, from VND675bn in 1H20.
• VRE’s total GFA stood at 1.6m sqm in 3Q20, unchanged from end-FY19, as no new malls had been launched since the beginning of 2020. 3Q20 occupancy rate stayed encouragingly at 84%, -7.9% pts yoy mostly due to the closure of Vinpro at end-19, but largely unchanged qoq.
• Revenue from property delivery fell 69% yoy to VND107bn in 3Q20. We expect VRE to book a revenue of VND1,627bn in 4Q20F.
• Net financial expense jumped 204% yoy in 3Q20, as unconvertible bonds rose 113% yoy from VND2,600bn in 3Q19 to VND5,500bn in 3Q20.
• For 9M20, VRE’s revenue fell 21.6% yoy to VND5,076bn and net profit declined by 28.5% yoy to VND1,407bn, forming 59% of our FY20F forecast.

Expect VND1,627bn to be booked from property delivery in 4Q20F

• We expect revenue from properties to grow 107% yoy to VND1,627bn in 4Q20F, mainly stemming from shop house delivery in My Tho, Bac Lieu, Cam Pha, Cao Lanh, Sa Dec and Kon Tum.
• We expected a retail mobility bounce-back to pre-Covid-19 levels to lift both 4Q20F average rental price and occupancy ratio above 9M20’s levels. VRE aims to launch Vincom Mega Mall Ocean Park (Hanoi) in Dec 20, which will add 56k sqm to total GFA (+3.5% yoy). We expect 4Q20F leasing revenue to rise 12.7% yoy to VND2,200bn.
• Overall, we expect 4Q20F revenue of VND4,013bn (+44.1% yoy) and net profit of VND997bn (+13.1% yoy), bringing FY20F NP to VND2,405bn(-15.6% yoy.

Reiterate Add with DCF-based TP of VND38,000

• We reiterate our Add rating with a VND38,000 TP (WACC: 12.6%). Potential catalysts: 1) faster-than-expected mall openings, and 2) faster-than-expected recovery in retail sales, lead to a strong growth in leasing business. Downside risk: another wave of Covid-19 outbreak, leading to further mall closures and rental support packages.

Read the full report: HERE

PetrolVietnam Transportation Corp (PVT) – Earnings Flash – ADD (+12.5%)

3Q20 results slightly ahead of expectations

3Q20 results not as bad as expected

• 3Q20 net revenue increased 6.5% yoy on higher trading revenue, which offset the 4.8% yoy decline in revenue from core activities (transportation and FSO/FPSO). Revenue from core activities declined on the back of (1) lower day rate for Dai Hung FSO since 2Q20; (2) lower crude oil volume from its key customer Dung Quat refinery as the plant carried out a 51-day maintenance from 12 Aug to 1 Oct; and (3) subdued charter rate at Dung Quat refinery from Apr to Sep 2020.
• Blended GPM contracted only 0.5% pts yoy, which we deem as better than expected given the maintenance at Dung Quat refinery. Transportation GPM even expanded 3.1% pts yoy, possibly thanks to (1) lower cost for very-low sulphur fuel oil (VLSFO) which benefitted vessels running international routes, and (2) increasing demand for coal imports (Vietnam’s coal imports surged 68.4% yoy in 3Q in terms of volume).
• 3Q20 pretax profit rose 6.2% yoy to VND222bn; but due to a 25.9% yoy jump in tax expenses, net profit fell 22.2% yoy to VND108bn.
  9M20 net profit beat expectations at 77.7% of our full-year forecast
• 9M20 net profit fell 28.1% yoy and accounted for 77.7% of our FY20 forecast. This is slightly ahead of expectations, as delays in vessel acquisition in 9M20 resulted in 9M net interest income and end-Sep cash balance that were higher than our forecasts. 9M20 capex was only VND2bn, significantly less than 9M19 capex of VND1,470bn and our FY20 forecast of VND1,238bn.
• We think PVT could reignite its tanker investment plan in 4Q20F, as the selling prices of vessels have corrected to more favourable levels. According to data on Bloomberg, prices for 10-year old very large crude carrier (VLCC) and Aframax tankers have both plunged ~17% YTD, and are now close to PVT’s target purchase prices in its FY20 guidance.

Reiterate Add, with unchanged TP

• Our TP is based on 50:50 combination of DCF and target 2020-22F P/E of 7.7x.
• A potential re-rating catalyst is higher coal transportation volume in FY21F as new coal-based power plants come into operation. Downside risk: decline in oil prices as that would hamper the recovery of charter rates and transportation demand.

Read the full report: HERE

Notable Corporate Events

Vietnam Rubber Group Joint Stock Company (GVR VN, HOSE) – Business result: GVR’s 9M20 revenue plunged 6% yoy to VND12,117bn, with its after-tax profit also edged down 12% yoy to VND2,033bn. The company said the 9M20 profit plunge was due to the prolonged COVID-19 impact. (Ndh.vn)

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