JP Morgan Financial Group recommends increasing the proportion of a Vietnamese stock

10/02/2024

JP Morgan Financial Group has just published a report analyzing investment strategies in the Vietnamese stock market and recommended "increasing the proportion" of MSN shares of Masan Group. With a valuation of VND94,640/share from JP Morgan, MSN has the potential to increase in price by up to 27% compared to the closing price of VND74,800 on September 24.

In a recently published report, JP Morgan emphasized that: "Vietnam will grow beyond forecasts in the ASEAN bloc in the fields of banking, information technology and essential consumer goods."

According to this financial group, in the past 12 months, nearly 3 billion USD has flowed out of the Vietnamese market due to profit-taking, portfolio reallocation by investors to technology/AI companies and the uncertainties of the US election. However, JP Morgan believes that the Vietnamese stock market is still attractive with many positive catalysts.

Removing "pre-funding" obstacles, welcoming billion-dollar capital flows

On September 18, the Ministry of Finance approved Circular 68/2024/TT-BTC amending and supplementing a number of articles of the Circulars regulating securities transactions on the securities trading system; clearing and settlement of securities transactions; activities of securities companies and information disclosure on the stock market, effective from November 2, 2024.

The new Circular stipulates that investors must have sufficient funds when placing orders to buy securities, except for two cases: (1) Investors trading on margin as prescribed in Article 9 of this Circular; (2) organizations established under foreign law participating in investment in the Vietnamese stock market to buy shares do not require sufficient funds when placing orders as prescribed in Article 9a of this Circular. Circular 68/2024/TT-BTC has added Article 9a on "Stock purchase transactions do not require sufficient funds when placing orders by foreign investors who are organizations".

“We believe these changes will allow FTSE to upgrade Vietnam to emerging market status within the next 12 months, resulting in over $500 million in passive capital flows into the market and the potential for a positive assessment from MSCI,” JP Morgan’s report stated.

Sharing the same view with JP Morgan, SSI Research predicts that Vietnam will be upgraded in the September 2025 review. With the upgrade to emerging market status, according to preliminary estimates, capital flows from ETFs could reach up to 1.7 billion USD, not including capital flows from active funds (FTSE Russell estimates total assets from active funds to be 5 times higher than ETFs).

According to SSI Research, stocks VNM, VHM, VIC, HPG, VCB, SSI, MSN, VND, DGC, VRE, VCI can attract large cash flows when Vietnam is upgraded to an emerging market. These are all leading Bluechip stocks but have not yet reached full foreign room.

Sharing the same opinion with SSI about the forecast that Masan Group's MSN shares will receive foreign capital, JP Morgan recommends increasing the proportion of MSN shares with a valuation of nearly VND 95,000/share.

“The consumer staples sector has grown 7% year-to-date, underperforming the broader market. We believe that short-term momentum is in favor of consumer staples stocks with: Potential cash flow from stock market upgrade; Lower USD helps reduce input costs; Steady revenue growth. We recommend overweighting the sector with MSN as one of our top picks,” JP Morgan analysts said.

Vietnam's economy tends to accelerate in the fourth quarter

JP Morgan believes that the Government's economic stimulus and business cycle will be the catalysts to boost economic activity throughout the second half of 2024 and this will spill over to stock market performance in the period from Q4/2024 - Q1/2025.

Vietnam’s economy is expected to pick up in the fourth quarter, driven by the business cycle (exporters pick up steam ahead of the holiday season), public investment (the government pushes for disbursements before the end of the year) and a robust tourist flow, the report said. This positivity tends to spill over into the stock market with a one-quarter lag.

The financial group believes that this cycle will continue to repeat this year as recent economic data points to continued acceleration in the second half of 2024. In addition, the Government has been making efforts to boost public investment disbursement and expand credit quotas to support growth. The Government is targeting GDP growth of 6.5 - 7% (up from 6 - 6.5% at the beginning of the year). Notably, in the past 4 quarters, Vietnam's growth has far exceeded that of ASEAN countries.

Using the sum-of-the-parts (SOTP) method, MSN is valued by JP Morgan at VND94,640/share with a target P/E for 2025 of 39x and EV/EBITDA of 12x. This price is 27% higher than the closing price on September 24 of VND74,800/share. SOTP is a method of determining the value of a company in which each subsidiary of a company or its business unit is valued separately and then all of them are added together to create the total value of the company.

According to Vietstock

Source: https://www.masangroup.com/vi/news/masan-news/Masan-expects-Q3-profit-to-exceed-Q2.html