HSC Securities: Asia Commercial Bank to Outperform

Next Story

7 Reasons To Visit and Love Dalat

October 13, 2016


  • ACB enjoys a decent stock run on positive earnings prospects and rumors of possible treasury share sale.
  • First 9M prospects look good.
  • HSC expects EBT to grow 22% this year and surpass forecasts.
  • Longer term prospects look good as we forecast EBT grows at a CAGR of 44% until FY2018.
  • Estimate of current CAR at around 13.8%, thus, ACB might activate treasury share sell out plan in FY2017.
  • FOL is still full, thus ACB might offer some as ESOP to employees or reallocate as a stock bonus.
  • Forward P/B of 1.37xs and P/E of 14.48xs for FY2016.
  • Reiterate Outperform.

ACB enjoys a decent stock run on positive earnings prospects and rumours of possible treasury share sale


Asia Commercial Bank (ACB – Outperform) stock has been running hard recently being up 2.69% to VND19,500 and also up 11.1% from last week’s price. The major driving factors behind the recent upsurge are positive earnings prospects for the first 9M and persistent rumours over possible sales of its treasury shares.

First 9M prospects look good – HSC estimates that first 9M EBT will come to VND1,200 (+10.09%) driven by credit growth of 17.5% YTD to VND157 trillion and customer deposit growth of 14.7%YTD to VND200 trillion. We also expect that NIM will decrease slightly by 5bps to 3.31%. The story behind ACB this year is one of accelerated credit growth as the bank has emerged from several years under SBV supervision where they substantially restructured their balance sheet and provisioned or write-off various legacy debt issues.

HSC expects EBT to grow 22% this year and surpass forecasts – HSC also forecasts that full year EBT will grow by 22% to VND1,603 billion or above the banks own target of VND1,500 billion (+14.14% y/y) and driven by the following assumptions;
1. 25% y/y growth in customer loans to VND167.53 trillion and 17% y/y growth in customer deposits to VND204.65 billion;
2. NIMs will drop 7bps to 3.34%, thus NII will rise by 16.13% y/y to VND6,832 billion;
3. Total non-interest income will be VND554.60 billion (+64.7% y/y);
4. Total provision expenses will up 43% y/y to VND1,264 billion;
5. Operating expense will increase 12.4% y/y to VND4,519 billion and CIR will be 55.87%;
6. CAR is around 13% as at FY2016-end.

We then see an adjusted EPS after bonus and welfare of VND1,347 and a BVPS of VND14,239 valuing the bank at a P/B of 1.37.

Longer term prospects look good as we forecast EBT grows at a CAGR of 44% until FY2018 – Looking ahead further we see longer term growth exceeding that of most other banks given a low LDR and the fact that most prudential ratios well controlled. We therefore forecast that over during FY2016-2018, ACB will grow EBT by a CAGR of 44.4% driven by CAGR of 19% in customer loans growth, a CAGR of 22% in customer deposit growth and a CAGR of 14.33% for net interest income growth. Although we also expect NIM may slightly decrease from 3.34% to 3.00% during the same period due to a deceleration in the growth of retail loans. Even so we expect CIR drop to around 50% by FY2018. And that ROE and ROA will improve to 0.81% and 13.6% as at FY2018-end.

Another factor behind the recent share price run is the ongoing speculation over the possible sale of current treasury share position totaling 41.4 million shares or 4.42% of the OS. At the current share price this is valued at about VND790 billion while the cost on the book is around VND665 billion. The market’s excitement of course is a little odd given the fact that for an FOL full stock like ACB, such a share sale would not be open to foreign investors. Alternatives to selling the shares would be to offer some as ESOP to employees; reallocate as a stock bonus. Or ask for permission to expand the foreign room (this is not as farfetched as you might think as other banks may find themselves in a similar situation).

However, we doubt that ACB will activate this plan in FY2016 as their current CAR of around 13.8% according to our rough estimation is still sufficient for asset growth, especially after the issuance of VND2,000 billion of subordinated long-term bonds at the end of June 2016 which boosted Tier 2 capital. According to HSC forecasts ACB’s CAR will still be close to 13% as at FY2016-end which suggests that they have plenty of time to raise capital. From what we understand any plan to sell the treasury shares will only occur in FY2017 to boost CAR before Basel 2 is applied in FY2018.






Global Disclaimer

Copyright 2016 Ho Chi Minh Securities Corporation (HSC). All rights reserved. This report has been prepared and issued by HSC or one of its affiliates for distribution in Vietnam and overseas. Opinions, estimates and projection expressed in this report represent the current views of the author at the date of publication only. They do not necessarily reflect the opinions of HSC and are subject to change without notice. HSC has no obligation to update, amend or in any way modify this report or otherwise notify a reader thereof in the event that any of the subject matter or opinion, projection or estimate contained within it changes or becomes inaccurate. The information herein was obtained from various sources and we do not guarantee its accuracy or completeness. Prices and availability of financial instruments are also subject to change without notice. This published research may be considered by HSC when buying or selling proprietary positions or positions held by funds under its management. HSC may trade for its own account as a result of short term trading suggestions from analysts and may also engage in securities transactions in a manner inconsistent with this report and opinions expressed there in. Neither the information nor any opinion expressed in this report constitutes an offer, nor an invitation to make an offer, to buy or to sell any securities or any option, futures or other derivative instruments in any jurisdiction. Nor should it be construed as an advertisement for any financial instruments. Officers of HSC may have a financial interest in securities mentioned in this report or in related instruments. This research report is prepared for general circulation for general information only. It does not have regard to the specific investment objectives, financial situation or particular needs of any person who may receive or read this report. Investor should note that the prices of securities fluctuate and may rise and fall. Past performance, if any, is no guide to the future. The financial instruments discussed in this report may not be suitable for all investors. Investors must make their own financial decisions based on their independent financial advisors as they believe necessary and based on their particular financial situation and investment objectives. As this report is HSC’s property and not public information, this report and any part of this report may not be copied, reproduced, published or redistributed by any person for any purpose without the express permission of HSC in writing. Please cite sources when quoting. Any Party shall be liable to HSC for any cost, loss or damage incurred by HSC or HSC clients as a result of any other breach under this Disclaimer in accordance with law.

More From the Author

  • HSC Securities: RE Sugar Processors to Benefit from Developments
  • HSC Securities: Real Estate Sector Update
  • HSC Securities: JS Commercial Bank to Outperform
  • Pha Lai Thermal Power Turning Around But Expensive
  • Vietnam Real Estate Giant Still Going Strong
  • Vietnamese Steel a Strong Buy
  • Fishing for Higher Returns
  • Mobile to Zoom
  • Bubbling Saigon Beer
  • Invest in Vietnam: Vietnam Infrastructure, a Rising Investment
  • Dat Xanh Continues to Look Promising
  • Vietnam Gas Rising
  • Let’s Wait on Vietnam Ex-Im Bank
  • Furniture Maker in Vietnam Still Too Rich
  • Invest in Vietnam: The Leading Port Play
  • Invest in Vietnam: How You Can Profit From The Meat Industry
  • Invest in Vietnam: Kinh Bac Vietnam Real Estate Leading to Big Pay-off
  • Dat Xanh Group’s Acquired Real Estate Assets Looks to be Next Goldmine
  • Kido Group’s Ice Cream & Cooking Oil Aim for Long-term Growth
  • Dien Quang JSC Led by LED Sales Looks to Have a Bright Future
  • Leave a Reply

    Subscribe Today

    We will send directly to your inbox the latest Vietnam investment commentaries, travel tips and "in the know" tidbits! 
    Join the Vietnamese IN CROWD!
    First Name
    Email address