Vietnam Daily Market Recap Nov 09 – VIB
Daily Market Recap 09/11/2020 507
Dear Valued Clients,
We would like to send you our Daily Market Recap for today
Market Commentary: The VN-INDEX rose 1.5%, the strongest gain in 10-weeks
The VN-INDEX gained 13.7pts today thanks to large support from Vingroup’s stocks. After the opening bell, the index started optimistically and stayed in the green territory for the whole session as almost large caps enjoyed an upward trend. Notably, Vingroup’s stocks including VHM, VIC, and VRE respectively rose 3.0%, 1.0% and 2.0% and added a combined of 3.1pts to the index’s move. Large caps from Financials and other sectors also joined the rally and further strengthened the upward momentum, led by CTG (+2.3%), VCB (+0.6%), MSN (+6.3%), and HPG (+3.6%). On the downside, top laggards today included NVL (-1.0%), SAB (-0.2%), and ASG (-4.1%), however their impact was minor to the index’s move. As major market pillars rose, the VN-INDEX ended the session at its intraday high of 952.0pts (+1.5%), while the HNX-INDEX also rose 1.7% to 141.6pts.
All sectors rose today, led by Materials (+3.1%), IT (+1.9%), and Industrials (+1.7%). Top index movers included VHM (+3.0%), MSN (+6.3%), HPG (+3.6%), VIC (+1.0%), and CTG (+2.3%). Top index laggards consisted of NVL (-1.0%), SAB (-0.2%), KOS (-3.3%), ASG (-4.1%), and FLC (-2.6%). Top three major put-through transactions were PME with 1.4m shares (VND103.8bn), VJC with 1m shares (VND103.4bn), and VPB with 3.6m shares (VND85.1bn).
Foreigners net sold on HOSE to the amount of VND231.7bn, and also net sold on HNX to the amount of VND1.1bn. They mainly bought VHM (VND144.1bn), VIC (VND89.4bn), and HPG (VND64.0bn); and mainly sold MSN (VND187.8bn), VHM (VND139.7bn), and HPG (VND105.0bn).
Oil climbs near US$38 after Biden victory; gold gains a third day
Oil advanced near US$38/barrel and gold climbed for a third day as President-elect Joe Biden prepared to transition into the White House even as Donald Trump rejected the outcome of the U.S. election. Crude futures in New York rose 2.3% and spot gold added 0.2% amid a broader rally in global stocks. The dollar extended declines. While Biden declared victory and prepared to navigate America’s pandemic-hit economy out of crisis, the unresolved status of Senate control may dampen prospects for major stimulus before January. Meanwhile, Trump’s campaign team mounted lawsuits in key states after alleging election fraud. Biden promised swift action against the pandemic and an orderly transfer of power during his victory speech over the weekend, but he inherits a divided country and an economy ravaged by the coronavirus as infections race toward 10 million. While a second Covid-19 wave across Europe is raising concerns about demand, trade data showed China is continuing to recover. (Bloomberg)
M&A market in 2021 sees impetus
The M&A market is forecast to see big changes since 1 January 2021 as the pandemic-induced slowdown wanes and the policy framework is radically improved. This was announced by experts at the press conference announcing Vietnam M&A Forum 2020 themed “Upsurging in the new normal” organised by Vietnam Investment Review on 5 November. AVM’s report showed that along with the negative impact on M&A activities this year, the COVID-19 pandemic also helped investors take a step back and study their targets more carefully. Besides, the pandemic impacts reduced valuations and put more assets on the market, strongly favouring buyers. In addition, policy changes have also improved convenience for investors to make share contributions and purchases. Phan Duc Hieu, deputy head of the Central Institute of Economic Management, forecast M&A activities in Vietnam to change from the beginning of next year, when three amended laws will come into effect at the same time. Reformed corporate governance principles in the Law on Enterprises will also promote M&A activities. Both the Law on Enterprises and the Law on Securities have important changes, including the institutionalisation of international principles and best practices in corporate governance, which contributes to enhancing the legal framework. Vietnam has numerous charms for foreign investors, being the only country in the region to produce positive growth this year. In addition, the country’s free trade agreements namely the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU – Vietnam Free Trade Agreement (EVFTA) and EU – Vietnam Investment Protection (EVIPA) also make Vietnam more attractive for foreign investors. (vietnamnet.vn)
Coverage Universe Update
VIB Commercial JSB (VIB) ─ Update – ADD (+6.7%)
Upward trajectory of earnings to extend in 3Q20
3Q20 credit leapfrog driven by individual lending
3Q20 net interest income grew 38% yoy to VND2,233bn due to 20.9% yoy loan growth and 52bp yoy rise in NIM. Loan book growth accelerated to 15.3% ytd at end-3Q20, more than double the growth of 6.7% ytd seen at end-2Q20. Individual lending widened 16.7% ytd at end-3Q20, vs 8.2% ytd at end-2Q20. 3Q20 non-interest income grew 35.5% yoy to VND798bn thanks to a 20.3% yoy growth in net fee income and a 111.9% yoy surge in income from bad debt collection. Cost-income ratio eased to 37.1% in 3Q20 from 41.4% in 3Q19, offsetting a 19.7% yoy increase in provision expense. Consequently, 3Q20 net profit (NP) jumped 52.4% yoy, extending the upward trajectory since 3Q19.
9M20 NIM expanded on lower funding cost
VIB enjoyed its highest annualised NIM of 4.1% in 3Q20, improving 15bp yoy on +5bp yoy asset yield (AY) and -10bp yoy cost of fund (COF). VIB’s upward trend of both AY and COF halted since 1Q20 under key rates cut but deposit rates fell faster than lending rates. 3Q20 AY fell 20bp which was offsetted by a 39bp plunge in COF, leading to 18bp higher NIM since 1Q20. Together with a loan growth of 15.3% ytd in 9M20, NII rose 30.8% yoy. Also, non-II rose 43.3% yoy while CIR improved to 40.3%, offsetting a 27.1% yoy surge in provision expense. Therefore, NP rose 38.1% yoy in 9M20.
Bad debt is still considerable
Non-performing loan (NPL) ratio fell to 2.14% at end-3Q20 from 2.37% at end-2Q20 while loan loss reserve (LLR) slightly dropped to 48.3% at end-3Q20 from 49.8% at end-2Q20. VIB increased writing-off bad debt in 3Q20, which made the annualized write-off rate rise to 0.36% in 9M20 from 0.12% in 1H20, helping to improve NPL ratio.
We increase EPS forecast by 7.4%-12.9% in FY20-22F
We raise our FY20/21F loan growth forecast to 20%/24% vs.18%/23% previously to reflect the expansion in credit demand in the past two months. Our revised FY20-22F NIM rise by 11-18bp on lower funding cost driven by ongoing loosening monetary policy in FY21F. We revise CIR down to c.43% from 44% in FY20-22F. Hence, NP is expected to grow 21.9%/14.1%/15.6% in FY20/21/22F vs. our previous forecast of 7.9%/17.8%/17.7%.
Reiterate Add with higher TP of VND35,000
Our new TP is VND35,000 (+33.1%) on the FY20-22F earnings upgrade and a higher FY21F P/BV (1.3x from 1.1x) to reflect the stock’s migration to Ho Chi Minh Stock Exchange. VIB is officially listed on 10 Nov 20. Hence, market price of VND32,800 is VIB’s closing price of its last day transaction on UPCOM on 29 Oct 20. Our TP is based on residual income valuation (COE: 15%; LTG: 3.0%) and 1.3x FY21F P/BV, weighting equally. Upside catalysts are better-than-expected loan and NIM rise. Downside risk would be higher-than-expected bad debt.
Read the full report: HERE
Notable Corporate Events
Thanh Thanh Cong Tourist JSC (VNG VN, HOSE) – Business results: VNG’s 9M20 revenue jumped 14.3% yoy to VND4,424bn, while its after-tax profit plunged 23.3% yoy to VND414.1bn. 9M20 revenue has completed 66% of the company’s annual target, while after-tax profit has exceeded its full-year plan of VND246bn loss. (Ndh.vn)
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