Vietnam Daily Market Recap Nov 27 – ACB & GAS & Property Devt and Invt

Dear Valued Clients,

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

Market Commentary: The VN-INDEX continued its gaining streak to close at 1,010.2pts

The VN-INDEX gained 0.4% to 1,010.2pts as Financials and Materials large caps lent support. Following yesterday’s positive sentiment, after the opening bell, the VN-INDEX started the session in the green, backed by blue chips from the Materials and Financials sectors. HPG edged up 3.3% to VND36,250, became today’s largest mover, rallied by VCB (+0.5%), HDB (+6.7%), and MBB (+2.6%), contributed a total of 2.4pts to the index’s gain. On the other hand, several large caps lost ground today, including VIC (-0.9%), GVR (-1.8%), and SAB (-0.8%). However, the gain was higher than the selling pressure from the laggards. At the end of the session, the VN-INDEX followed its uptrend to rise 0.4% and land at the intraday high of 1,010.2pts, continuing its ninth day gaining streak, while the HNX-INDEX lost 0.2% to close at 148.2pts.

Materials (+2.4%), Consumer Discretionary (+1.8%), and IT (+0.7%) rose, while Energy (-0.2%), Consumer Staples (-0.1%), and Health Care (-0.1%) lost ground today. Top index movers included HPG (+3.3%), BCM (+7.0%), VCB (+0.5%), HDB (+6.8%), and MBB (+2.6%). Top index laggards consisted of VIC (-0.9%), GVR (-1.8%), SAB (-0.8%), BID (-0.4%), and VJC (-0.9%).

Market News

OPEC+ calls last-minute talks to prepare for oil-cuts decision

Saudi Arabia and Russia summoned OPEC+ ministers who oversee their oil production cuts for last-minute talks on Saturday, as the cartel prepares for a decision on whether to delay January’s output increase. A clear majority of OPEC+ watchers expect the group to maintain their supply curbs at current levels for a few months longer due to lingering uncertainty about the strength of demand. However, the decision is by no means certain amid public complaints from Iraq and Nigeria, and private discord with the United Arab Emirates. (Bloomberg)

Bottlenecks in Vietnam’s renewable energy development

Vietnam will likely have to increase coal power to ensure stable and affordable power supply. The economic impact of Covid-19 and the limitations of Vietnam’s national grid will hinder the country’s attempts to turn away from coal and embrace renewable energy. Vietnam needs to meet electricity demand growth of about 8% per year, with power consumption forecast to rise from 265-278 terawatt-hours (TWh) in 2020 to 572-632 TWh in 2030. In terms of natural resources, the country is well endowed for solar and wind generation, with extensive coastlines, slopes and rivers combined with high annual rainfall. Its wind power potential exceeds that of Thailand. As of June, 12 gigawatts (GW) of wind power projects proposed by private investors had been approved. (Vietnamnet.vn)

Sector Update

Property Development & Investment Sector Update

Stay tuned for re-ratings in 2021F

HCMC: new supply and sales volume recover on qoq basis

According to CBRE Vietnam, the 3Q20 HCMC condo market witnessed a significant recovery on qoq basis, with +141% qoq (-70% yoy) in new launches (3,964 units) and +125% qoq (-72% yoy) in sales volume (3,552 units). Vinhomes Grand Park cemented its leading position with about 3,502 units launched, accounting for 88% of the new supply. The condo prices across the board stayed nearly flat qoq but inched up 1.1-7.1% yoy.

Hanoi: new condo supply dwindles

3Q20 Hanoi new condo supply plunged 45% yoy/37% qoq to only 3,503 units; leading to a drop of 12% yoy/17% qoq in sales volume. The mid-range segment accounted for 71% of sales volume with 3,007 units sold, which is 20% higher than its new supply. Like in HCMC, the primary prices across the board slightly rose 0.8-2.0% qoq and 2.4-4.5% yoy. Although a second wave of Covid-19 in late-Jul and early-Aug restricted sales and marketing activities, the number of transactions in 3Q20 in Hanoi was still higher than newly-launched units, jumping 44.7% pts yoy to 120.2%.

Binh Duong emerging as a hotspot in 2020-2021F

This area is currently attracting not only top local developers, such as Vinhomes (VHM VN, Add, TP:VND104,300), Dat Xanh (DXG VN, NR, CP:VND14,150), Phat Dat (PDR VN, NR, CP: VND38,650), but also foreign developers like Sembcorp Development (Unlisted) and Tokyu (Unlisted). In 9M20, new condo supply was 8,289 units, just 10% below that of HCMC. 9M20 take-up rate in Binh Duong was 96.6%, equivalent to that of HCMC, driven by a high demand for experts, engineers and workers in this area.

FY21F outlook: A firm recovery trajectory from 2021F onwards

We expect the residential market to recover in 2021F, based on three factors: 1) a broad-based recovery of macro fundamentals propelling the property market in 2021F; 2) housing purchasing decisions underpinned by affordable mortgage interest rates; and 3) a surge in new supply thanks to the loosening of regulatory bottlenecks.

Our top picks are VHM, NLG and KDH

We upgrade Vietnam’s residential property sector to Overweight from Neutral on broad-based economic recovery and loosening regulatory bottleneck in 2021. Re-rating catalyst is recovery in new supply. Downside risk is lower-than-expected new supply due to regulatory delays. Our top picks are VHM, KDH and NLG, in view of their positive presales outlook in FY20-21F along with their huge ready-to-use land bank.

Read the full report: HERE

Coverage Universe Update

PetroVietnam Gas JSC (GAS) – Update – HOLD (+8.8%)

Transforming into a pure gas distributor

Better-than-expected 9M20 results on effective cost management

PVGas reported a 29.8% yoy decline in 3Q20 net profit, mainly due to lower sales volume of gas products (dry gas -6.0% yoy, LPG -4.0% yoy) and lower ASP on the back of a 34.3% yoy decline in the benchmark Singapore fuel oil price. For 9M20, the company posted a 31.2% drop in net profit to VND6,150bn, which came in slightly above our expectations at 82.8% of our FY20F forecast due to lower-than-expected SG&A expenses and lower interest expense as the company paid off debt faster than our projection. Therefore, we adjust our SG&A and interest expense assumptions to better reflect the 9M20 results, leading to an 8.6% increase in FY20F EPS forecast.

Sao Vang Dai Nguyet to ease the gas supply shortage in 2021-23F

On 16 Nov, PVGas announced that it received first gas from Sao Vang field, sticking to its schedule for first gas in 4Q20F. Although the contribution of Sao Vang would be minimal in 2020F, we estimate this field could add 800-900 mcm of gas p.a. to total volume from 2021F onwards; while Dai Nguyet field remains on track to come online in 3Q22F, adding another 800 mcm of gas p.a. We estimate these two fields to generate VND0.9tr-1.6tr in gross profit for PVGas in 2021-23F, making up c.14% of the dry gas segment’s gross profit. We forecast FY21F EPS to increase 35% yoy, on the back of a recovery in gas sales volume (+5.2% yoy) and higher oil price (+ c.16% yoy).

Medium term profitability to come from gas transportation

In 2020-24F, total gas sales volume is forecast to grow at a CAGR of 5.0% as the supply from depleting old fields is replaced by new sources such as Sao Vang – Dai Nguyet from 2021-22F, imported LNG from 4Q22F and Block B – Blue Whale from 4Q24F. We believe that with the new supplies, PVGas would benefit mainly from gaining the transportation tariff, without the profit from differences between gas purchasing-selling prices. We estimate gross profit contribution from gas transportation to increase from an average of 21% in 2015-19 to an average of 33% in 2020-24F.

Reiterate Hold at higher TP of VND87,900

We raise our TP to VND87,900 as we roll our valuation to 2021 and apply a higher target P/E of 15.3x on FY21-23F EPS. We are using a 7-year historical average P/E instead of 0.5 s.d. below mean P/E previously as the ongoing oil price recovery has lifted investor sentiment on oil and gas stocks. Upside risk is higher-than-expected oil price; downside risks include delays in gas field development and an extended Covid-19 pandemic putting pressure on oil prices.

Read the full report: HERE

Asia Commercial JS Bank (ACB) – Update – ADD (+19.1%)

Synergies from the exclusive banca deal

Non-interest income (non-NII) growth to accelerate going forward

The upfront fee payment for the exclusive 15-year bancassurance partnership is US$370m, slightly lower than that of US$382m in the FWD-Vietcombank deal last year. Based on the FWD-VCB deal, we estimate that this upfront fee payment will be booked equally over the next five years. With ACB’s intensive network of 371 branches and transaction offices, and 3.6m individual accounts, we expect non-NII to increase by 33-35% in FY21-23F.

Awaiting migration to the main bourse

On 20 Nov 2020, ACB was allowed to migrate to the Ho Chi Minh Stock Exchange (HOSE). As long as the bank moves to HOSE before end-2020, ACB is likely to be added into two blue-chip indexes, VN30 and VNDiamond, when the indexes are reviewed in Aug 21 and Nov 21, respectively. As such, ACB will meet all requirements of these indexes, including: (i) top 20 market cap; (ii) minimum free float of 10%; or (iii) daily turnover; (iv) maximum of the remaining foreign ownership limits of 5%; and v) at least 6-month listing on HOSE.

Raise FY21-23F EPS forecasts by 7.6-9.2%

We raise our net fee income (NFI) forecasts by 63.8%/52.3%/47.7% for FY21F/22F/23F to reflect the exclusive bancassurance deal. We expect ACB to receive both the upfront fee income of US$370m, dividing equally over the next five years, starting in 2021F, and the new stream of commission fee. Meanwhile, we maintain our loan growth forecast of c.15% yoy in FY21-22F and CIR of 48%. As a result, our net profit forecasts rise by 9.1%/8.1% for FY21/22F.

Reiterate Add with higher TP of VND32,400

We raise our TP by 14.9% to VND32,400, following our EPS forecast revisions. ACB was officially allowed to list on the HOSE on 20 Nov 2020. The migration to the main bourse would increase liquidity and attract more investors, in our view. Our TP is based on a residual income valuation (COE: 14%, LTG: 3%) and 1.7x FY21F P/BV, weighted equally. We upgrade our valuation multiple to 1.7x FY21F P/BV from 1.5x FY21F P/BV previously to reflect the promising outlook from the bancassurance deal. Downside risks include lower-than-expected loan growth, and delays in receiving upfront fee from the recent deal in FY21/22F.

Read the full report: HERE

Notable Corporate Events

Nam Long Investment Corporation (NLG VN, HOSE) – Dividend Payment: NLG has set 15 Dec to be the record date for paying the 2020 cash dividend of VND453/share, based on a company’s statement. The payment will be made on 29 Dec 2020. (Ndh.vn)

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