Research Center

Despite the deep challenges facing aviation because of the pandemic, we believe aviation is an attractive long-term investment. The main reasons are 1) The world is getting steadily richer—about half the world is now middle class or richer so tourism demand continues to rise, 2) A tech revolution in the aviation industry make air travel safer before the pandemic and 3) Ancillary revenue has taken off, promote greater cash flow.

The country credit growth was 1.47% ytd as of 19 March 2021, doubling the same period last year but is relatively low as compared to previous years. However, we believe this is not a sign of bank tightening credit to the economy as the industry is often busy at the quarter-end. Besides, from banks’ guidance for upcoming annual general meetings (AGM) we see that bankers seem quite positive on 2021’s outlook.

Vietnam has a promising insurance market from its low penetration rate of 2.65% compared to 9.6% in advanced markets. Insurance density was USD72 compared to USD4,664 of the advanced markets. Total population possessed life insurance products was just ~8.5%. Those imply a potential field for all players in the sectors.

We could see a better quarter on quarter in 4Q20F new supply as the developers are under pressure to ramp up sales to meet the full-year target. However, the accelerating launches in 4Q20F still suffer a drop by 10-30% yoy as the second COVID wave in Aug discouraged the marketing plan which were kicked off to bolster sale events in 4Q20F. Despite the new supply slumps on yoy base in 4Q20F, we are upbeat on 4Q20F earning growth of 35-40% yoy leading by VHM, DXG thanks to tens of thousands of units delivered in 4Q20F.

3Q20 business result of aviation firms remained murky with Covid-19 ghost still covering in the world. It was brought an unprecedented impact on aviation industry. This is a fiscal year with a decline in profits and debts inflated. In Vietnam, the lockdown status has been removed but international commercial flights are still delayed as quarantine process waiting for approval.

An amendment of Cir.01 with the extension of debts subjected for restructuring may be finalized and announced soon in Oct 2020. This may provide credit institutions a leeway to further assist severe impacted debtors and enables them to contain NPL ratio and credit cost in 2020 and 2021 at manageable levels. We maintain Overweight on the sector.

The re-emergence of COVID-19 in Da Nang city has pushed back hopes of a strong second half recovery. However, we do not believe that Vietnam’s residential market will see a sharp crash in FY20-21F as the typical indicators of a bubble market are currently not prominent. We expect governmental actions like infrastructure spending, regulatory amendments plus softer mortgage rates could bolster volume in FY21F.

The big restructuring in 2Q20 with Keep NPL ratio low and Credit cost retreat. Overall, the banking industry posted strong 1H20 earnings growth despite of strong headwind from the virus globally. Combined net profit (NP) of non-financial HSX companies was down 23% yoy while financial led by banks reported a NP growth of 15% yoy in 1H20.

We envisage another gloomy quarter in 3Q20F as some social distancing requirements to curb the second wave of COVID-19 could blow sales events. Despite a sluggish 3Q20F industry conditions, sector’s bottom line in 3Q20F could see steady yoy growth leading by VHM, KDH thanks to the delivery schedule is more skewed in favour of 2H20F.