VNIndex on Friday closed at 914.29, down 1.14% w.o.w. Although the liquidity on HOSE was quite weak during the week at average of VND2,524bn ($109.9mn) per day, foreign investors had a positive net buying two weeks in a row. The foreigner’s net buying is VND341.5bn($14.8mn).
We made a clear statement last week that we should look deeply into the VN Mid Cap stocks, therefore, for this week, we look into the net trading of foreigners of top trading stocks of Vn30 and VN70 in October. After cancel out the SK Group’s $470mn investing in MSN, the net selling of Vn30 was $50mn, much bigger than the Vn70’s net selling of $0.48 million. Another interesting view when we look into our analyst’s 2019 EPS forecast, 45% of the mid-caps we cover have more than 15% of EPS growth. This will make the valuations of these companies cheaper in the future which in our view is very attractive.
Our Head of Research believes the USD is toppy and there is a high probability that it will weaken compared to other currency, especially emerging market currencies over the next 12-18 months. If he is right, there could be a lot of money moving to emerging markets looking for attractive return plus gains from currency appreciations.
Top Picks
DIG corporation (HSX: DIG)
Price : VND14,200
52w High : VND27,200
52w Low : VND12,300
Avg 30day Volume : 1,682,193
P/E : 13.1x | P/B : 1.23x
Catalysts:
Huge land bank for development: main focus on second grade cities close to major industrial park, tourism destinations and ports such as Vung Tau, Dong Nai and Vinh Phuc. Three key projects on progress are: Dai Phuoc residential area, Nam Vinh Yen phase 2 and Long Tan projects.
Re-structuring its business: actively divesting from its subsidiaries and affiliates in order to provide cash flow to support its development.
Maintained its financial leverage at 0.5-0.6 times over the years.
Valuation:
We used the RNAV method to estimate one-year fair value of DIG at VND19,500/share for the total return of 37.3% compared to closed price in 09/11/2018. Therefore, we recommend to BUY the stock.
Risk:
Low efficient ratio and not positive short-term prospect
If the launching of residential units is being delayed, the company would not have cash flow to finance future large project. However, due to the divestment of the State and the involvement of financial investors, we stay positive in the company.
Rong Viet Securities Equity Research Summary
Strategy Report
Investment Strategy November 2018
GLOBAL MACRO
By our estimation, the economies of emerging Asia will expand by the size of the entire Mexican economy in the next few years.
Equity fundamentals are good in Asia, except for return on investment (RoE), which need to improve.
We recommend buying Asia ex Japan and shorting the S&P 500
VIETNAM MACRO
Vietnam’s economy slowed down in October.
November’s events expected to drive the FX rate, an over 3% depreciation of the Dong in 2019.
VIETNAM’S STOCK MARKET IN OCTOBER: A BIG SLUMP
It took three months for the VN-Index to recover by 15% from the bottom at 885 and only one month to blow that away.
The VN30-Index and the VNMID-Index dropped 9.4% and 11.7% respectively, while small cap did a bit ‘better’: VNSML-Index fell 7.2%.
Liquidity dropped quite a bit compared to September
Foreign investors net bought VND 9,242 bn in the month.
NOVEMBER STOCK MARKET OUTLOOK
It can be possible that the VNIndex is at a relatively strong support level.
We think leading institutional investors will have a huge impact on where the market goes.
Company Report
BINH DIEN FERTILIZER JSC (HSX: BFC) – (Initiation, ACCUMULATE, VND26,800, UPSIDE 11%)
Revenue reached VND1.689Tn in 3Q18, up 6.8% YoY thanks to a higher selling price while total selling volume remained stable. The rising input prices that lowered the gross margin from 14.6% to 13.7%.
A marketing campaign as well as the discount policy lifted the selling expense/revenue to 33% in 3Q18. BFC posted VND58bn in net profit, down 18.8% YoY.
4Q18, not a peak season, will result in a low consumption of fertilizer.
We predict that revenues will increase by 4.7% to VND6.604tn and the net profit attributable to the parent company will decrease by 23.8% to VND211bn.
The stock is trading at 26.x current EPS of VND4,457. Furthermore, at its current price, it is trading at ~1.2x P/B. Cash dividend is expected at VND2,500.
Analyst Pinboard
3Q18 Earnings Update
Banks grew at a slower rate than previous quarters (17% YoY) in line with what we expected.
Earnings of real estate stocks, such as NLG, NVL and DXG surged as companies recognized profits this quarter.
PVS profited from the Sao Vang Dai Nguyet project while PVS and PVD also had a reversal of provision, boosting the earnings of the Oil & Gas sector considerably.
Almost all steel companies (HSG, NKG, VIS, POM, and TLH), excepting for HPG, struggled due to higher input prices and higher competition.
NPAT of the market increased by 21%, of which VHM and GAS contributed significantly.
However, excluding financials and banking sectors, revenue growth and NPAT growth of the market is only 12% and 9%, respectively.
In conclude, a significant portion of earning growth is from the financial sector, GAS and MSN, causing worry about the growth of these big pillars not be that great next year.
Nam Viet Corporation (HoSE: ANV ) – 9M18 Business Results
In 3Q18, net revenue came at VND1.051tn (+43% YoY). PAT was VND131bn (+245% YoY).
In 9M18, ANV recorded net revenue of VND2.735tn (+30% YoY) and PAT reached VND308bn (+253% YoY), equivalent to EPS of VND913/sh (+33% YoY), completing 85% of revenue target and 123% of net profit target.
General gross margin has increased sharply to 16% in 9M18 compared to 13% in the same period.
The farming area of the company is expected to expand from 250 hectares to 400 hectares in 2019. ANV aims to keep the Chinese market at a maximum 35% of revenue to maintain a diversified market structure.
In 2Q18, ANV received VND120bn from Dai Tay Duong company of Mr. Doan Toi. In addition, ANV has completed the divestment in Cromit Nam Viet with the salvage value of VND6bn in July 2018.
Outlook for 4Q18 and 2019
ANV expects the export prices in 4Q will be approximately the same as 3Q.
We believe that the gross margin in 4Q will be stable as in 3Q.
In 2018, ANV expects to reach VND3.6tn in net revenue and VND400bn in PAT. Accordingly, we estimate gross margin to reach 15.8%, up from 14.7% in 2017. ANV expects to keep selling prices stable in 1H19 and slightly down by 5% 2H19. Therefore, we expect the company to maintain a high gross profit margin as of 2018.
JSC Bank For Investment And Development Of Vietnam (HoSE: BID ) – Updates on 9M18 Business Performance
PBT was VND7.254tn, fulfilling 78.0% of its full year guidance. Lending in 3Q2018 grew faster than in 1H18; however, quarterly NIM was on a slight decline to 0.7% from 0.9% in 3Q17 and 0.8% in 1Q18.
Due to the NIM drop, net interest income was down 9.6% YOY. In 9M18, net interest income only increased by 11.3%, lower than other banks’.
TOI growth in 9M18 was driven by other net income growth by 18.3%.
Operating expenses were well managed (-8.7%) while provision expenses decelerated.
The capital raising process has progressed.
BID is currently trading at VND 32,800, equivalent to a PBR forward of 2.2x, not very attractive compared to other banks (except for VCB).
Refrigeration Electrical Engineering Corporation (HoSE: REE ) – Earnings growth in 2018 is quite certain
POWER AND WATER UTILITIES SEGMENT
- VSH – Issues with Thuong Kon Tum (TKT) hydropower project remains tough but GENCO3’s divestment could open a solution
- CHP – Poor hydrological conditions continues to affect 4Q 2018 performance while Cu Jut solar power project is well going on
- TMP will have to take over the Thac Mo Expansion Hydropower project via public auction
- PPC – The changes in capex plan have been approved; earnings outlook remains strong
- VCW – Phase 1 of the plant will run at full capacity by the end of this year
- Tan Hiep II Water Treatment Plant will run at full capacity in 2019
M&E SEGMENT
The accumulated backlog at the end of 3Q2018 was VND5.32tn.
NPAT of M&E segment in 9M18 is VND154bn.
REAL ESTATE DEVELOPEMENT SEGMENT
Breakdown for VND79bn NPAT of “Real estate” component in 3Q18 financial statement.
REE is considering participating the private replacement of SGR.
Regarding VIID, the company has completed sales of STD Tower project but the project is not qualified to book revenue within 2018 as planned.
OFFICE LEASING SEGMENT
The current occupancy rate of etown Central office building is over 80%.
Etown 5 office building: REE expect to have this building ready for lease by March 2018 at leasing price of 20 USD/m2.
Overall, we see a positive 2018 outlook on business results of REE but still notice some uncertainties for 2019 earnings growth.
Temporary Stabilization of the FX Market
In general, the current situation is better and supports our view of a chance for disbursements in the Vietnam’s stock market in November.
The yuan experienced a significant reversal in current trading sessions. Both of the Rupiah and Rupees went sideways in October. The Dong and Bath are still the most stable currencies in the region. The Ringgit is slowing down.
Risky currencies have temporarily regained their upside momentum.
We remain positive on the Dong as well as Vietnam’s stock market. We expect a 3% depreciation in 2018 against the USD.
Vietnam Container Shipping JSC (HoSE: VSC ) – Updates 9M18 Business Result
Net sales reached VND1.244tn (+ 30% yoy) and EBT came to VND288bn (+ 33% yoy), fulfilling 92% of its net revenue target and surpassing 3% of the EBT target.
About revenue:
- Downstream player, VIP Green port, continues to be the growth driver of VSC.
- Revenue of parent company, Green port, reached VND427bn (+ 18% yoy), contributing 34% of consolidated revenue.
- Other subsidiaries contributed VND266bn in revenue, up 31% YoY.
- Gross profit increased 24% to VND374bn. Gross profit margin was 30.1%, lower than 31.6% in 9M2017.
- Net financial loss was down to VND22bn, down 30% YoYthanks to a reduction in interest expenses.
- SG&A expenses increased 19% YoY to VND68bn.