Vietnam – Daily Market Recap Nov 11

Dear Valued Clients,

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

Market Commentary: The VN-INDEX stayed nearly flat at 952.2pts

The VN-INDEX stayed nearly flat, gaining only 0.03pts to end at 952.2pts with mixed performance of large caps. In Vietnam, the VN-INDEX started the session in the green with the support from several large caps, led by GVR (+3.6%) and GAS (+1.4%). Notably, APH reached its ceiling price at VND80,200, contributing 0.20pts to the index. Other Real Estate large caps also joined the rally, including VIC (+0.2%), HSG (+3.5%) and NLG (+2.9%). However, profit – taking activities emerged in the afternoon session, thus pushing the VN-INDEX to its intraday low of 947.6pts (-0.1%). VHM became the largest laggard, falling 1.0% to VND76,600, followed by VCB (-0.2%), HVN (-1.8%) and VRE (-0.7%). Fortunately, the VN-INDEX managed to stay in the green at the end of the session. The VN-INDEX closed nearly flat at 952.2pts, and the HNX-INDEX also ended nearly flat at 141.8pts (+0.3%).

Consumer Discretionary (+0.9%), Utilities (+0.8%), and Materials (+0.7%) rose, while Real Estate (-0.3%), IT (-0.2%), and Consumer Staples (-0.1%) lost ground today. Top index movers included GVR (+3.2%), GAS (+1.4%), MWG (+1.9%), APH (+6.9%), and VIC (+0.2%). Top index laggards consisted of VHM (-1.0%), VCB (-0.2%), HVN (-1.8%), VRE (-0.8%), and BHN (-2.6%).

Market News

Oil rises to US$45/barrel in London for first time in 10 weeks

Oil rose to US$45/barrel in London for the first time in 10 weeks as an apparent drop in U.S. crude stockpiles added to the rally driven by a vaccine breakthrough. The American Petroleum Institute reported crude inventories dropped by 5.15m barrels last week, with gasoline and diesel stockpiles also decreasing, according to people familiar with the data. Official government figures are due Thursday. The median estimate in a Bloomberg survey forecast nationwide crude stockpiles shrank by 1.9m barrels. (Bloomberg)

Vietnam remittances fall for first time in 11 years

Remittances to Vietnam are set to fall for the first time since 2009 to US$15.7bn this year over Covid-19 impacts. Even though this is a 7.6% drop from last year’s US$17bn, Vietnam will remain the ninth biggest remittance beneficiary in the world, according to a recent report by the World Bank. In the East Asia and Pacific region, the country is forecast to rank third behind China (US$59.5bn) and the Philippines (US$33.3bn). This year’s remittance is estimated at 5.8% of Vietnam’s GDP, compared to 6.5% last year. The dip reverses an upward trend that’s lasted two decades, starting at a mere US$1.3bn in 2000. (Vietnamnet.vn)

Coverage Universe Update

Vietnam Prosperity JSB (VPB) – Update – ADD (+17.9%)

Strong earnings growth on positive operating jaws

9M20 net interest income (NII) rose 5.3% yoy on credit spike

VPB posted NII of VND3,606bn in 9M20, on the back of 16.5% yoy credit growth despite a 77bp yoy drop in NIM. 9M20 blended NIM slipped to 8.5% from 9.3% in 9M19 as a result of lacklustre credit growth at the bank’s consumer finance arm, FE Credit. Loan growth remained strong at 9% yoy in 3Q20 after VPB restructured its lending portfolio, and after the State Bank of Vietnam lifted the credit growth quota (includes loans and corporate bonds) for VPB from 13% to 21.5% in FY20F. Thus, we revise up our forecast for consolidated loan book growth from 7.4% to 10.2% in FY20F.

Better operating cost controls thanks to digitalisation

VPB’s cost-to-income ratio (CIR) fell sharply from 34.7% in 9M19 to 30.5% in 9M20, the lowest among listed banks, thanks to investment ramp-up in digital banking. The bank was almost the first mover to be fully compliant with all eKYC (contactless onboarding) regulations, allowing customers to open accounts and conduct transactions online within several minutes. By end-3Q20, the number of digital users at the parent bank reached 1.3m (+75% yoy). We expect digitalisation will improve VPB’s performance efficiency and help the bank to maintain its low CIR levels (32%) in FY20-22F.

Assets quality showed signs of deterioration

Non-performing loan (NPL) ratio inched up to 3.6% at end-3Q20 from 3.5% at end-3Q19 as NPL ratio of FE Credit jumped to 6.5% at end-3Q20 from 5.2% at end-3Q19. We believe the increase in bad debts was due to the negative impact of Covid-19 on the mass customer segment, which is a major focus area for the consumer finance company. Furthermore, loan-loss reserve (LLR) fell to 48% at end-3Q20 (the lowest among HOSE listed banks) from 50% at end-3Q19 while annualised write-off ratio decreased by 4bp yoy to 4.75% in 9M20.

Upgrade to Add with a higher TP of VND28,000/share

We raise our EPS forecasts for FY20-22F by 6.1-17.9% on the back of higher credit growth and lower operating expense assumptions. As a result, our target price rises 12% to VND28,000, based solely on the residual income valuation (COE: 14.3%, LTG: 3.0%). Downside risks could come from higher-than-expected credit costs. Potential re-rating catalysts include better-than-expected asset yields and equity raising via the sale of a 49% stake in FE Credit with higher-than-expected valuation to strategic investors.

Read the full report: HERE

Notable Corporate Events

Sai Gon Thuong Tin Real Estate JSC (SCR VN, HNX) – Business results: SCR’s 9M20 revenue and pre-tax profit reached VND344bn and VND82.5bn, respectively. The company has completed 17% of its revenue year target and 68% of its pre-tax profit year target. (Ndh.vn)

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