Vietnam Daily Market Recap Dec 01 – VCB

Dear Valued Clients,

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

Market Commentary: The VN-INDEX gained 5.8pts despite the early trading selling pressure

The VN-INDEX recovered 0.6% from the fall in Monday’s session backed by large support from Real Estate and Consumer Staples sectors. After the opening bell, the market quickly fell to its intraday low of 988.7pts (-1.4%) due to the news of the first domestic Covid-19 case in Vietnam after 3 months. VCB was the laggard, dropping 1.1% to end at VND92,000 and taking 1.0pts from the index’s move. The stock was followed by BCM (-4.1%), HVN (-0.9%), PLX (-0.4%), and HNG (-1.4%). However, in the afternoon session, market pillars led by Real Estate stocks joined the rally, lifting the index back to the green territory. Notably, largest support came from VIC and VHM and their respective gains of 1.1% and 0.9% added a combined 1.6pts to the index’s rise. Other Consumer Staples large caps also joined the advance, including VNM (+1.4%), SAB (+1.0%), and MSN (+1.2%). As the results, the VN-INDEX rose 0.6% to close at its intraday high of 1,008.9pts, and the HNX-INDEX also jumped 0.8% to land at 148.9pts.

Consumer Staples (+1.1%), Financials (+0.8%), and Real Estate (+0.5%) rose, while IT (-0.3%) and Energy (-0.2%) lost ground today. Top index movers included VIC (+1.1%), VNM (+1.4%), VPB (+4.1%), VHM (+0.9%), and VIB (+6.9%). Top index laggards consisted of VCB (-1.1%), BCM (-4.1%), HVN (-0.9%), PLX (-0.4%), and HNG (-1.4%). Top three major put-through transactions were GAB with 1.1m shares (VND211.2bn), FUEVFVND with 12.3m shares (VND195.3bn), and HSG with 10.7m shares (VND179.2bn).

Foreigners net bought on HOSE to the amount of VND220.3bn, and also net bought on HNX to the amount of VND4.7bn. They mainly bought FUEVFVND (VND204.0bn), VNM (VND149.0bn), and VHM (VND117.2bn); and mainly sold VHM (VND101.6bn), CVT (VND80.6bn), and HPG (VND73.5bn).

Market News

Oil extends drop as OPEC+ struggles for consensus on output plan

Oil fell for a third day as OPEC+ sought more time to reach a deal on production policy after a meeting broke down without an agreement. Futures were 0.8% lower in New York. Ministers will now meet on Thursday rather than Tuesday to allow more time to deliberate on whether to delay a planned increase in output from January. While some see the market as too fragile to absorb additional barrels, others are keen to pump more to take advantage of higher prices following Covid-19 vaccine breakthroughs. (Bloomberg)

Pandemic drags down FDI attraction to Vietnam

Vietnam had attracted a total of US$26.43bn in FDI this year as of November 20, equal to 83.1% of the figure in the same period last year, according to a recent report from the Ministry of Planning and Investment. The global economy has been battered by the coronavirus pandemic, the ministry noted, while investors have been unable to travel due to restrictions. During the period, 2,313 new projects were granted investment registration certificates, a yoy decline of 33.5%. Total registered capital stood at US$13.6bn, down 7.6%. Regarding additional capital, 1,051 projects registered to adjust their capital, down 16.3% yoy, while the total capital topped US$6.3bn, a yoy rise of 7.8%. Some US$6.5bn was poured into 5,812 capital contribution and share purchase deals made by foreign investors, a fall of 41.8%. Foreign investors channeled capital into 19 fields, with the largest amount, of over US$12.7bn, going to manufacturing and processing. Power generation and distribution followed, with more than US$4.9bn from foreign investors, then real estate with nearly US$3.8bn and wholesale and retail sales with US$1.5bn. FDI came from 109 countries and territories, of which Singapore took the lead with nearly US$8.1bn, accounting for 30.6% of the total. The Republic of Korea followed, with US$3.7bn, then China with US$2.4bn. Foreign investors invested in 60 cities and provinces nationwide. The Mekong Delta’s Bac Lieu province led the way, with one mega project worth US$4bn, accounting for 15.1% of total capital. HCM City and Hanoi were second and third, with US$3.8bn and US$3.2bn, respectively, making up 14.4% and 12.2% of the total. The ministry’s Foreign Investment Agency said export revenue of the foreign-invested sector had picked up after being pinned down for ten months. Excluding crude oil, the sector’s shipments totaled US$179.5bn for the 11-month period, up 6.9% yoy and accounting for 70.7% of the country’s total export revenue. Foreign firms purchased US$148.9bn worth of products from abroad in the period, a yearly increase of 9.1% and making up 63.5% of total import revenue. (Vietnamnet.vn)

Coverage Universe Update

Vietcombank (VCB) – Update – Hold (+5.9%)

Best positioned for the recovery

We expect 4Q20F net profit to see robust growth

We expect 4Q20F net profit to increase 35% yoy on the back of NIM’s resilience. At end9M20, VCB’s total restructured loans was c.VND10,400bn, ranked 3rd among the listed banks in terms of total amount and equivalent to 1.3% of its gross loans. With a credit stimulus package of up to VND300tr for affected Covid-19 clients, asset yield slipped from 6.2% in 9M19 to 5.9% in 9M20, dampening 9M20 NIM by 25bp yoy to 2.9%. However, we expect VCB’s asset yield to bounce back as the bank’s last credit support package expired at end-3Q20.

Equipped to have the best asset quality among peers

The bank’s asset quality remains top-notch with non-performing loan (NPL) ratio at 1.0% at end-3Q20. Besides, its loan loss reserves (LLR) climbed to 215% at end-9M20 from 185% at end-9M19. This remains the highest in the banking industry even though its write-off rate inched up from 0.12% at end-3Q19 to 0.18% at end-3Q20.

We forecast 25% EPS CAGR in FY20-22F

We project 25% net profit CAGR in FY20-22F, driven by 18.6% CAGR in NII on the back of 14.5% loan CAGR and 37bp NIM expansion over the period. We also forecast 45% FY20-22F CAGR in non-II, including a 57% FY20-22F CAGR in fee income, thanks to income from payment services and bancassurance new income stream. We expect the pandemic situation to be less intense in FY21F, thus boosting commercial finance activities as well as VCB’s fee income. We project NPL to inch up to 1% in FY20 and 1.15% in FY21F as the bank is more exposed to retail lending but its asset quality remains solid with high loan-loss coverage ratio (170-210%) in FY20-21F.

Reiterate Hold with a higher TP of VND97,700

We lift our TP to VND97,700 based on equal weight of residual income valuation with a lower cost of equity (COE: 12%; LTG: 4.0%) and a higher target 3.3x FY21F P/BV (previously 2.8x). While our FY20-22F forecasts are intact, we believe the growing interest among foreign investors in VCB should pave the way for a higher valuation.

Re-rating catalysts and downside risks

Potential re-rating catalyst is a successful capital raising of VND23tr via private placement with higher-than-expected valuation. Downside risks are higher-than-expected credit cost and lower-than-expected credit growth.

Read the full report: HERE

Notable Corporate Events

Saigon Cargo Service Corp (SCS VN, HOSE) – Dividend payment: SCS has set 15 Dec to be the record date for paying the first 2020 cash dividend of VND3,000/share. The payment will be made on 30 Dec. (Ndh.vn)

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