Vietnam – Daily Market Recap Oct 22 – DPM

Dear Valued Clients,

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

Market Commentary: VN-INDEX surged 1.2% on the back of Financials and Real Estate large caps

The VN-INDEX closed up 1.2% to 949.9pts, the highest in nearly 9 months, backed by the support from all sectors, despite the early trading selling pressure. Following the 0.4% loss of Dow Jones Industrial Average yesterday, the VN-INDEX kicked off the morning session in red and gradually eased to its intraday low of 933.8pts (-0.4%), as some blue chips followed the downward momentum in the previous session. Specifically, SAB, VHC and VCF from the Consumer Staples sector declined by 0.6%, 3.8% and 3.7% respectively, and together wiped out 5.3pts from the index. However, the VN-INDEX rebounded strongly in the afternoon session thanks to strong advance of Real Estate and Financials large caps. Notably, VIC gained VND2,800 (+2.9%) to become the largest supporter, alone adding 2.7pts to the index’s gain, followed by VHM (+1.4%). Financials large caps also joined the rally, including CTG (+3.1%), BID (+1.4%), BVH (+4.4%) and VCB (+0.5%). At the end of the session, the VN-INDEX gained 1.2% to end at its intraday high of 949.9pts, the highest level since 30 Jan when it closed at 959.6pts, and the HNX-INDEX also gained 0.6% to land at 140.9pts.

All sectors rose today, led by IT (+2.0%), Consumer Discretionary (+1.9%), and Real Estate (+1.7%). Top index movers included VIC (+2.9%), VHM (+1.4%), CTG (+3.1%), GAS (+1.9%), and BID (+1.4%). Top index laggards consisted of SAB (-0.4%), VHC (-3.8%), CII (-4.9%), VCF (-3.7%), and VSH (-5.0%). Top three major put-through transactions were EIB with 16.4m shares (VND285.8bn), DXG with 6.6m shares (VND79.4bn), and HDB with 2.2m shares (VND56.6bn).

Foreigners net sold on HOSE to the amount of VND614.8bn, and also net sold on HNX to the amount of VND4.7bn. They mainly bought EIB (VND97.8bn), DXG (VND81.5bn), and HPG (VND66.1bn); and mainly sold MSN (VND209.7bn), VNM (VND143.3bn), and EIB (VND93.9bn).

Market News

Oil holds near US$40/barrel after biggest decline in two weeks

Oil held near US$40/barrel in New York after the biggest drop in two weeks on Wednesday following a surprise jump in U.S. gasoline stockpiles and slowing demand. Motor fuel inventories last week rose the most since May and a measure of the fuel’s consumption slid to the lowest level since late September, according to the US government data. (Bloomberg)

Vietnam’s public debt estimated to reach 56.8% GDP by year end

The total Government debt repayment in the first 9 months of 2020 was VND 241.37tr, or 65.8% of the whole yearly plan, including VND180.95tr paid for domestic debts and VND60.43bn for foreign debts. The government, considering predictions about the last months of the year, thinks that the total public debt will reach 56.8% of GDP by the end of the year, while the government’s debt will be 50.8% of GDP. The government’s debt direct repayment on the state budget collection would be 24.1% and the nation’s foreign debts would be 47.9% of GDP. As such, the major indexes of the public debts in comparison with GDP by the end of the year would be within the safety line set by the National Assembly. The government commented that the debt restructuring had made progress. The outstanding public debt has decreased from its peak of 63.7% of GDP in 2016 to 55% in late 2019. The public debt growth rate has decreased from 18.1% in 2011-2015 to 6.8% per annum in 2016-2019. Meanwhile, the interest rates are on the decrease and the payment terms on the increase. “The repayment of the government’s debts in the last years have been implemented strictly to ensure repayment on time for both the government’s direct debts and the government’s borrowing for relending, not letting debts become overdue, which would break Vietnam’s commitments to lenders,” the report says.

In 2021, the government plans to borrow VND579tr for Government budget balancing, including VND318tr for covering the budget over expenditures and VND260tr for paying the principal on the budget. The Government’s direct debt repayment obligation is roughly VND368.27bn, of which domestic debt payment obligation is VND323.09tr and foreign debt obligation is VND45.18tr, equal to 27.4% of the state budget revenue. As such, the ratio of the government’s direct repayment on the state budget collection exceeds the threshold of 25% set by the National Assembly for 2016-2020. This is because the debts in government bonds are due in 2021 (VND187.001tr), which accounts for 13.9% of the state budget collection. The government reported that the ratio of the government’s direct repayment obligation to the state budget revenue has increased rapidly and the figure is likely to exceed 25% in some years in the next periods, because the debts to be repaid are uneven in coming years and are especially high in some years. (Vietnamnet.vn)

Coverage Universe Update

Petrovietnam Fertilizer & Chemicals Corporation (DPM) – Update – HOLD (+6.8%)

Positive 3Q20 as expected

No major surprises in 3Q20 results

• On 20 Oct, DPM released its 3Q financial reports, with net revenue increasing 3.3% yoy to VND1,955bn but net profit surging 200.5% yoy to VND182bn.
• Net revenue still recorded a positive growth as the 16% yoy increase in urea sales volume outweighed the estimated 12% yoy decrease in urea ASP. In 3Q, a temporary surge in demand from foreign markets (India, Brazil) helped DPM expand its market abroad. The company reported an export volume of 60,000 tonnes of urea in Sep 20 at a slightly higher selling price than the domestic price, which contributed to the revenue growth.
• 3Q20 net profit increased 200.5% yoy on the back of (1) an estimated 21.3% yoy slide in gas input price with the 34.3% yoy fall in the benchmark Singapore fuel oil price, (2) a 21.8% yoy decrease in G&A expenses, thanks to continuous cost-cutting efforts, and (3) 33.5% higher financial income on higher short-term investments and FX gains.

9M20 in line with our expectations

• 9M20 net revenue rose 8.0% yoy as the plants restored normal operations after the 72-day maintenance shutdown in 1H19. Urea sales volumes jumped 41.5% yoy while average 9M selling price fell 16% yoy.
• The 9M bottomline recovery was supported by the sales volumes growth, a 39.7% decline in benchmark oil price, and aggressive cost-control initiatives, which helped boost 2Q and 3Q results.
• 9M net profit was largely in-line at 76.8% of our full-year forecast. We believe global oil prices would stay relatively flat qoq at US$42-43/bbl in 4Q20F (Brent crude oil price), which would help the company achieve our FY20F net profit forecast of VND768bn.

Risks

• Upside risks to our forecast: (1) A change in VAT policy applied to fertiliser products; the Resolution on which is at the final stage of preparation to be submitted at the current National Assembly meeting (20 Oct to 17 Nov). If the VAT policy is approved and takes effect from 1 Jan 2021, we estimate DPM could receive a tax deduction of VND300bn-350bn, translating to 15-17% upside to our target price. (2) Possible one-off insurance claim for the 2019 operational issues at the plants.
• Downside risks are lower-than-expected urea and NPK selling prices.

Read the full report: HERE

Notable Corporate Events

Tien Phong Plastic Joint Stock Company (NTP VN, HNX) – Business results: NTP’s 9M20 revenue slightly rose to VND3,394bn, with after-tax profit climbed 14.4% yoy to VN342bn, the company said. The results meant that NTP has completed 85% of FY20F profit plan. (Ndh.vn)

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