Vietnam Daily Market Recap Nov 23

Dear Valued Clients,

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

Market Commentary: The VN-INDEX reached highest level in 2020 with 0.4% rise

The VN-INDEX recorded its fifth consecutive rise of 4.2pts as most large cap traded in the green today. In the Monday morning session, the VN-INDEX met profit-taking activities after gaining 2.5% last week and quickly plunged to its intraday low of 985.4pts (-0.4%). VCB became the largest laggard, falling 1.0% to close at VND91,600 and taking 0.9pts from the index’s move. The stock was followed by GVR (-2.6%), CTG (-0.9%), SAB (-0.8%), LGC (-7.0%), and VNM (-0.3%). However, in the afternoon session, the rally of other large caps, including VHM (+2.7%), HPG (+5.0%), GAS (+2.1%), MSN (+1.3%), MWG (+2.2%), and STB (+3.2%), gradually lifted the index from the red territory to its intraday high of 995.9pts (+0.6%). At the end of the session, the VN-INDEX rose 0.4% to land at 994.2pts and the HND-INDEX also gained 0.7% to close at 148.2pts.

Materials (+3.0%), Consumer Discretionary (+2.1%), and Utilities (+1.6%) rose, while Financials (-0.3%) lost ground today. Top index movers included VHM (+2.7%), HPG (+5.0%), GAS (+2.1%), MSN (+1.3%), and MWG (+2.2%). Top index laggards consisted of VCB (-1.0%), GVR (-2.6%), CTG (-0.9%), SAB (-0.8%), and LGC (-7.0%). Top three major put-through transactions were VJC with 2.6m shares (VND303.1bn), VHM with 2.1m shares (VND165bn), and FPT with 2.3m shares (VND135.7bn).

Foreigners net bought on HOSE to the amount of VND160.3bn, while net sold on HNX to the amount of VND5.6bn. They mainly bought VHM (VND221.9bn), FPT (VND135.7bn), and VNM (VND109.2bn); and mainly sold FPT (VND135.7bn), VHM (VND103.5bn), and VNM (VND68.0bn).

Market News

Oil advances from 12-week high on U.S. vaccination optimism

Oil pushed higher after closing at the strongest level since early September as signs that Covid-19 vaccinations in the U.S. could be underway within three weeks improved the demand outlook. Futures in New York rose past US$43/barrel after capping their third straight weekly gain. Vaccinations will “hopefully” start as soon as Dec. 11 or Dec. 12, Moncef Slaoui, head of the American government’s Operation Warp Speed vaccine acceleration program, said on CNN on Sunday. (Bloomberg)

Vietnam, Oman to foster bilateral trade

The two-way trade turnover increased sharply from US$117m in 2017 to US$200m in 2019. Vietnam and Oman will continue to maintain the comprehensive development of various fields, including diplomacy, investment, trade, and tourism, through the annual meetings of the Vietnam-Oman Intergovernmental Cooperation Committee, said Oman’s Ambassador to Vietnam Saleh Mohamed Ahmed Al Suqri. On the occasion of the 50th anniversary of the National Day of Oman on November 18, the ambassador of Oman said that since the bilateral relation was established in 1992, the two countries had made a number of remarkable achievements in trade. The two-way trade turnover increased sharply from US$117m in 2017 to US$200m in 2019. The two countries are negotiating and finalizing some agreements to further promote bilateral ties. With the traditional friendship and long-term cooperation, Vietnam and Oman have been potential strategic trade partners of each other. Also, the two countries always support each other to maintain their positions in Southeast Asia and the Middle East, as well as in the global market, said Saleh Mohamed Ahmed al Suqri. Earlier in March 2018, Minister of Industry and Trade Tran Tuan Anh and Oman’s Minister of Commerce and Industry Ali bin Masoud bin Ali al Sunaidy signed a cooperation agreement between the two countries. Since the signing, many trade and investment projects have been initiated, raising total bilateral import and export turnover over the past few years. Besides, after more than 10 years of establishment, the Vietnam-Oman Investment (VOI), a joint venture between the Oman Investment Authority and the State Capital Investment Corporation of Vietnam, invested some US$300m in Vietnam, focusing on some sectors such as hi-tech agriculture, infrastructure, water treatment, renewable energy, pharmaceutical and healthcare, and education. (vietnamnet.vn)

Coverage Universe Update

FPT Corporation (FPT) – Update – ADD (+24.9%)

Moving into FY21F with confidence

FPT’s 10M20 earnings in line with our expectations

10M20 net revenue rose 7.4% yoy to VND23,635bn, fulfilling 76.4% of our full-year projection, while net profit increased 7.7% yoy to VND2,927bn, in line at 83.3% of our fullyear forecast. Blended GPM widened 66bp yoy to 41.8% in 10M20 on higher revenue contribution from digital transformation (Dx), which earns high margins. Particularly, 10M20 Dx revenue jumped 38% yoy to VND2,704bn, equivalent to 11.4% of FPT’s total revenue (vs. 8.9% in 10M19).

We expect 4Q20F net profit to see sharp growth

We expect 4Q20F net profit to increase 26.6% yoy due to the low base effect as 4Q19 saw higher employee bonus costs and loss of VND20bn at FPT Retail (FRT VN, Nonrated, CP: VND22,700) and loss of VND12bn at FPT Securities (FTS VN, Non-rated, CP: VND12,800). For the whole FY20F, FPT’s revenue and net profit are projected to increase 10.1% yoy and 12.1% yoy to VND30,930bn and VND3,514bn, respectively.

Return to solid growth on the back of vaccine availability in FY21F

For FY21F, we expect the pandemic situation to improve with the availability of vaccines. As a result, we forecast FPT’s FY21F revenue and net profit to grow by 17.1% and 20.3% yoy, respectively. We believe FPT’s GPM will further improve on the back of the higher proportion of the Dx business line in technology revenue. In particular, FPT’s blended GPM will gain 0.3% pts to 39.5% in FY21F, in our view.

Reiterate Add with a higher TP of VND67,800

Our higher TP is based on a sum-of-parts methodology and derived from an unchanged P/E-based multiple approach rolled forward to FY21F for its three main business segments. The multiples are extracted from the regional FY21F P/E median corresponding to each segment with discounts given the difference in interest rates between countries. We hold our positive stance on FPT’s long-term outlook, especially when the pandemic blows over.

Re-rating catalysts and downside risks

Potential re-rating catalysts are a successful M&A deal with an overseas technology company and higher-than-expected signed IT services revenue. Downside risks include shortage of high-quality IT personnel to achieve the company’s long-term strategies and fewer technology contracts if the pandemic prolongs.

Read the full report: HERE

VIETJET AIR JSC (VJC) ─ Update – HOLD (-0.9%)

The worst time may be behind

Air transport business to recover in 3Q20

VJC’s total flights fell 55.3% yoy to 15,190 flights in 3Q20, most of which are domestic flights with lower revenue per flight than international flights, leading to a 72.5% yoy drop in core revenue. VJC has no S&LB transactions in 3Q20 while it recorded VND836bn of S&LB gross profit in 3Q19, resulting in a net loss of VND971bn in 3Q20 (vs a NP of VND1,700bn in 3Q19). However, despite the Covid-19 outbreak in Da Nang in late-July, we saw a recovery in VJC’s 3Q20 business results. Due to domestic traffic recovery, 3Q20 total flights increased 10.1% qoq, leading to a 41.5% qoq hike in core revenue, which helped 3Q20 net loss from core business narrow to VND968bn from VND1,479bn in 2Q20.

S&LB, abnormal financial income and other income to save FY20F profit

In FY20F, we expect total pax volume to drop 40.4% yoy, of which outbound pax volume would plunge 87.7% yoy while inbound pax volume would drop 18.1% yoy. We envisage VJC’s revenue/NP from core business to drop 57.9% yoy /2,614% yoy to VND16,255bn/VND-4,099bn, but we expect S&LB transactions, abnormal financial and other income to boost FY20F NP to VND96bn.

FY21-22F outlook is enlightened by the vaccine announcement

As at 20 Nov 2020, six vaccines have been approved for early or limited use. Based on the positive signs from vaccine development, in FY21-22F, we expect outbound pax volume to soar 365% yoy/75% yoy, which equals to 57.3% /100.1% of the 2019 level, while inbound pax volume to grow 23.1% yoy/8.0% yoy, which equals to 100.8%/108.8% of the 2019 base. We expect FY21-22F net profit from core business to propel to VND182bn/VND879bn and S&LB transactions would help boost FY21-22F NP to VND3,169bn/VND4,652bn.

Reiterate HOLD as positive factors have been priced in

We raise our TP by 13.9% on the back of: (1) upward revision in FY22F EPS forecasts onwards following higher domestic traffic growth assumption and (2) we roll forward our DCF valuation to FY21F. Upside risk includes higher-than-expected international traffic recovery since FY21F. Downside risk includes (1) uncertainties arising from the pandemic and (2) higher-than-expected fuel price.

Read the full report: HERE

Notable Corporate Events

Pomina Steel Corporation (POM VN, HOSE) – Business activities: POM has announced to put into operation the steel furnace using Consteel technology since 18 Nov, the company said. POM’s new steel furnace, which locates in Ba Ria-Vung Tau province, has a capacity of 1m tonnes per year (Ndh.vn)

Should you have any question, please feel free to contact us.