PYB Elite: Banks are the true growth story in Vietnam

PYN Elite is very hot on Vietnamese bank stocks

“At the moment, Vietnamese banks account for a total of 32.5 per cent of PYN Elite’s portfolio. Our top picks are HDBank(HSX: HDB), VietinBank (HSX: CTG), and TPBank (HSX: TPB),” said Petri Deryung, portfolio manager and board member at PYN Elite. “We increased our weighing in banks already before the coronavirus crisis due to banks’ importance for the Vietnamese stock market. Many banks had improved their earnings in 2019 but they still lagged behind the VN-Index.”

Deryung also explained that in Europe, there has been a lot of talk about the financial sector’s future growth and the quality of banks’ balance sheets. However, things are different in Vietnam where the banks are the true growth stories. They are not to be picked for being good dividend stocks because the banks are investing their profits for future growth.

In recent years, the fund’s key banking stocks have recorded annual growth in earnings and revenue up to 30-40 per cent. This year will also be a decent one, despite COVID-19. Many of PYN Elite’s banks are expecting earnings growth as much as 20 per cent in 2020 and this will lead to P/E ratios of 5-6.

Besides, a number of Vietnamese banks have accelerated their initial public offering (IPO) process or switched exchanges, signalling ambitions to tap into larger capital inflows. For example, LienVietPostBank showed intentions of switching from the UPCoM to the Ho Chi Minh City Stock Exchange (HSX) and raising its foreign ownership limit from 5 to 9.99 per cent to tap into overseas capital.

Privately-held lender ACB, which is currently listed on the Hanoi bourse, signalled its ambition of listing on the HSX in November or December.

SHB and VIB may also follow suit, saying they would shift focus from the capital's exchange to its southern counterpart.

At the end of July, PYN Elite’s portfolio reached approximately $450 million, 4 per cent of which was allocated for cash, and 96 per cent for Vietnamese stocks. Shares of Vietnam Engine and Agricultural Machinery Corporation (UPCoM: VEA) held the largest proportion, accounting for 11.85 per cent.

In its recent report, PYN Elite assessed that VEA had a solid cash flow, but UPCoM somehow restrained its potential. The fund expected VEA would be listed on the major bourse, HSX, within the next few years.

VEA dividend rates are relatively high, around 10 per cent of the market price. The firm’s dividend yield might be reduced due to increasing share price.

PYN Elite believed VEA is one of the most attractive tickers as it is expected to double its valuation within the next three years.

Last month, PYN announced it would lift its ownership cap at local IT and telecom CMC Group.