Vietnam – Daily Market Recap Nov 20 – POW

Dear Valued Clients,

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

Market Commentary: The VN-INDEX rose on Friday to achieve weekly gain of 2.5%

The VN-INDEX rose 0.7% to 990.0pts, achieving the second highest point since Jan 2020. After the opening bell, the VN-INDEX started in the green, but soon dropped to its intraday low of 980.7pts (-0.4%), due to the selling pressure from several large caps, led by GVR (-1.6%), VRE (-0.9%) and MWG (-1.1%). Other large caps also lost ground today, including SAB (-0.9%), VIC (-0.2%) and GAS (-0.4%). However, with the strong support from the Financials and Real Estate sector, the VN-INDEX stayed in the green, led by VCB (+2.5%), VHM (+1.3%), BID (+2.0%), KDH (+6.9%) and PDR (+6.9%), contributed 4.8pts to the index. Foreign investors net bought for the 3rd day in a row with the amount of VND94.2bn in HOSE and net sell at VND27.9bn in HNX. The VN-INDEX again closed at its intraday high of 990.0pts (+0.7%). The HNX-INDEX also edged up 0.3% to close at 147.2pts.

Industrials (+2.2%), Financials (+1.1%), and IT (+0.7%) rose, while Consumer Discretionary (-0.4%), Utilities (-0.3%), and Energy (-0.2%) lost ground today. Top index movers included VCB (+2.6%), VHM (+1.3%), BID (+2.0%), VJC (+4.6%), and VNM (+1.1%). Top index laggards consisted of GVR (-1.6%), SAB (-0.9%), VIC (-0.2%), VRE (-0.9%), and GAS (-0.4%). Top three major put-through transactions were VJC with 3.2m shares (VND363.2bn), VNG with 6m shares (VND99bn), and LIX with 1.5m shares (VND90.5bn).

Foreigners net bought on HOSE to the amount of VND94.2bn, while net sold on HNX to the amount of VND27.9bn. They mainly bought VNM (VND114.9bn), GEX (VND68.9bn), and VJC (VND59.6bn); and mainly sold MSN (VND70.1bn), CTG (VND60.1bn), and VRE (VND60.1bn).

Market News

Oil set for weekly gain as vaccine optimism outweighs lockdowns

Oil is poised for a third weekly gain in New York as positive Covid-19 vaccine developments outweighed concerns about more restrictions stemming from a global surge in infections. Futures are back near US$42/barrel and set for the longest run of weekly gains since August following news of another vaccine breakthrough on Monday. Optimism around a vaccine offset a grim picture emerging across the U.S. with Americans urged not to travel for Thanksgiving, California ordering a one-month curfew and New York closing public schools. (Bloomberg)

Vietnam urged to move up global value chains post-pandemic

Vietnam needs to diversify global supply chains in order to achieve inclusive growth and attract investment after the pandemic ends. Commodity exports in the period increased by 4.7% over the same period last year, with a total US$229.3bn. The country’s trade surplus reached a record high (US$18.7bn) in the period, with 13 free trade agreements (FTAs) and two FTAs under negotiation. However, the country’s participation in global value chains remains limited, despite being one of the most open economies. The Vietnamese economy is 1.5 times and five times more open than Thailand and China, respectively. Experts said that Vietnam should accelerate the application of automation and digital technology, as well as diversify supply chains to attract foreign investment. The country needs high-quality human resources, good infrastructure, and new technologies to open up more services for them to become the driving force of the economy. The country also needs to improve its productivity. (Vietnamnet.vn)

Coverage Universe Update

PetroVietnam Power Corporation (POW) – Update – ADD (+23.5%)

Bumpy recovery

Bottom line fell sharply in 3Q20

PetroVietnam Power (POW) generated 4.2bn kWh of electricity (-14.9% yoy) in 3Q20 while its average selling price (ASP) fell 9.4% yoy as a second wave of COVID-19 halted the recovery of demand, while the fast recovery of hydropower (the cheapest source of power) dragged down the prices on competitive generation market (CGM). 3Q20 revenue tumbled 22.9% yoy to VND6,112bn, but net profit recorded a larger decline of 85.0% yoy due to a one-off provision expense of VND85bn for Electric Power Trading Company (EPTC)’s receivables and higher tax expenses as the tax incentives for Ca Mau 1&2 plants expired in 2020.

9M20 results fell below our expectations

9M20 revenue fell 16.9% yoy to VND21,795bn on an 8.2% yoy drop in sales volume and 9.5% yoy decline in electricity ASP. 9M20 net profit declined 40.3% yoy to VND1,303bn, coming in at 54.4% of our full-year forecasts. This number was below our expectations due to the faster-than-expected recovery of hydropower that stifled the CGM price and lowered the mobilisation of thermal power sources.

We cut FY20-21-22F EPS forecasts by 19.7%-27.7%

Taking into account 3Q20 results, we reduce the utilisation rate of gas-fired and coal-fired plants, while increasing POW’s hydropower utilisation by 5% pts. In addition, we now assume CGM price to fall 20% yoy, leading to a 4.9% downward revision in ASP. For FY20F, we expect EPS to fall 22.9% yoy before recovering at a slower pace than previously, at 15.6% yoy in FY21F and 12.3% yoy in FY22F.

Reiterate Add with lower target price of VND12,200

We cut our TP to VND12,200 due to lower FY20-22F EPS forecasts while maintain the Add rating on the back of: 1) net profit recovery in FY21-22F as demand rebounds post Covid-19 and POW would not encounter gas supply issues like in 1H20, given that the new gas field Sao Vang has come into operation in Nov 20, and 2) potential gas-fired capacity expansion (+55.0%) over the next five years. Our TP is based on an equal weighting of DCF and target FY20-21F EV/EBITDA of 5.5x. Re-rating catalyst: gas-fired output recovery from FY21F. Downside risk: unexpected operational/technical issues.

Read the full report: HERE

Notable Corporate Events

Mobile World Investment Corporation (MWG VN, HOSE) – Business results: MWG’s 10M20 revenue rose 6% yoy to VND90,102bn and its after-tax profit also edged up 1% yoy to VND3,283bn, a company’s report showed. With this result, MWG met 95% of the guidance for FY20 (Ndh.vn)

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