Vietnam Daily Market Recap Nov 03 – 3Q20 earnings review

Dear Valued Clients,

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

Market Commentary: The VN-INDEX edged up 0.2% ahead of the US election

The VN-INDEX recorded its third consecutive rise of 0.2% as almost large caps trading in the green today. Following a positive performance on the U.S stock market the previous night, the VN-INDEX opened optimistically and quickly rose to its intraday high of 937.6pts (+0.4%). GVR was the largest movers, rising 6.2% to close at VND15,500 and alone adding 1.0pts to the index’s move. Other large caps catching up with the advance included TCB (+2.8%), BID (+1.3%), PDR (+6.9%), GAS (+0.7%), and FPT (+2.1%). On the contrary, top laggard today included VIC (-2.0%), VCB (-0.9%), CTG (-0.7%), MSN (-0.6%), and BCM (-1.3%). However, their impact was minimal compared to the overall gain. At the end of the session, the VN-INDEX edged up 0.2% to settle at 935.4pts, and the HNX-INDEX also rose 1.2% to land at 138.6pts.

IT (+2.3%), Industrials (+0.9%), and Utilities (+0.9%) rose, while Real Estate (-0.7%) and Health Care (-0.1%) lost ground today. Top index movers included GVR (+6.2%), TCB (+2.8%), BID (+1.3%), PDR (+6.9%), and GAS (+0.7%). Top index laggards consisted of VIC (-2.0%), VCB (-0.9%), CTG (-0.7%), MSN (-0.6%), and BCM (-1.3%).

Foreigners net sold on HOSE to the amount of VND653.5bn, and also net sold on HNX to the amount of VND6.5bn.

Market News

Oil gains on weaker dollar after OPEC+ edges toward Taper delay

Oil gained, following a broader risk-on sentiment in markets and as OPEC+ inches closer to delaying a planned easing of output cuts. Futures in New York rallied near US$38/barrel after rising 2.9% in the previous session. Equities were rallying ahead of the U.S. election, while the dollar lost almost 0.5%, adding to positive sentiment in crude. On Monday, Energy Minister Alexander Novak met with Russian producers to discuss delaying an easing of production cuts by three months. The Organization of Petroleum Exporting Countries and its allies have been dropping hints for weeks that its plan to add almost 2 million barrels a day of supply from January is being reconsidered as demand falters. (Bloomberg)

Vietnam’s trade surplus hits record in 10 months

Vietnam’s exports rose 4.7% yoy in 10M20 to over US$229bn, for a trade surplus of a record US$18.7bn, according to latest report by the General Statistics Office. During the 10-month period, 31 goods earned over US$1bn each from exports, accounting for 91.8% of the total. Five brought home more than US$10bn each, or close to 60%. The US remained the largest importer of Vietnamese goods in 10 months, with turnover of US$62.3bn, up 24% yoy. It was followed by China, the EU and ASEAN. Total imports in October were estimated at US$24.5bn, up 1.2% mom and 10.1% yoy. Ten-month imports totalled US$210.55bn, up 0.4% yoy. As many as 34 types of goods saw import turnover exceeding US$1bn, accounting for 89.4% of the total. (Vietnamnet.vn)

Market strategy

3Q20 earnings review: Resilient

On track for recovery

Based on our estimates, aggregate earnings of listed companies on three bourses (HOSE, HNX, UPCOM) dipped 2.7% yoy in 3Q20. This reaffirms our expectations for a V-share recovery, in our view, despite a 2 nd wave of the Covid-19 outbreak in July. 9M20 aggregate earnings slid 6.2% yoy while revenue fell 12.1% yoy. Out of the 43 companies under our coverage that have reported their 3Q20 results, 54% companies were in line with our expectations while 23% beat forecasts and 23% missed our estimates.

A stellar quarter for construction material and property sectors

After a 31% yoy decline in earnings in 2Q20, the property sector made a strong comeback in 3Q20 with a 34% yoy increase, thanks to better delivery and presales. With state investment ramping up in recent months, mostly focusing on infrastructure development, construction materials enjoyed higher prices and better sales volume, leading to a 47% yoy hike in the sector’s net profit. Industrial metals (mostly steel manufacturers) posted a 144% yoy surge in 3Q20 net profit on the back of higher steel export volumes (+44.4% yoy) and 31.9% yoy lower coke prices.

Vibrant stock market boosted financial services’ 3Q20 earnings

3Q20 net profit of financial services providers (mostly securities brokerages) grew 60% yoy, thanks to the recent market rally in both indexes and liquidity. In 3Q20, the VN index accelerated 15.2% from end-Jun 20 while average liquidity increased 0.3% qoq and 33.6% yoy. The vibrant stock market also helped insurance companies’ financial revenue surge 31.6% yoy. Meanwhile, the slowdown in insurance premium revenue growth resulted in lower provisioning and operating costs, lifting 3Q20 NP of the insurance sector by 25% yoy. On the other hand, banks’ net profit growth decelerated to 4% yoy in 3Q20 (vs. 23% yoy in 2Q20) as heavy provisioning weighed on bottomlines.

Travel & leisure, oil & gas not out of the woods yet

A second wave of Covid-19 infections in Danang city in late-Jul disrupted the recovery momentum for domestic travel and tourism. Additionally, international flights have been halted since Mar 20, damaging the bottomlines of airlines and airport operators. Consequently, travel & leisure (including airlines) recorded huge losses in 3Q20 (274% yoy plunge in net profit) while 3Q20 net profit of the transportation sector slumped 68% yoy. Oil & gas 3Q20 net profit tumbled 37% yoy due to lower oil price, albeit better than the drop of 116% yoy seen in 2Q20. Among the sectors hit hard by the pandemic, retail bounced back strongly with 9% yoy growth in 3Q20 net profit, thanks to MWG (+16% yoy) and DGW (+44% yoy), riding the recovery in domestic consumption in 3Q20.

VN index target is 900-960pts for end-2020

3Q20 corporate earnings performance reaffirms our expectations for a V-shaped recovery and has been fully reflected in valuations following the recent market rally. The VN index rallied to 925.7pts on 30 Oct 2020, equivalent to trailing P/E of 14.5x, up 42% from its bottom of 650pts in Mar. We think the VN index will move sideways in 4Q20 to end the year within our target of 900-960pts. In our base-case scenario, we forecast VN index earnings to drop 5-6% yoy in FY20F (vs. +7.1% yoy in FY19) before rebounding to grow 21% in FY21F. The decent earnings outlook bodes well for a broad-based economic recovery in 2021.

Read the full report: HERE

Notable Corporate Events

Phat Dat Real Estate Development JSC (PDR VN, HOSE) – Business results: PDR recorded 9M20 revenue and after-tax profit rose 6% yoy and 79% yoy, respectively, to VND2,498bn and VND718bn. The results mean PDR has completed 66% of the company’s revenue plan and 60% its full-year profit target. (Ndh.vn)

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