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MBB Update- HOLD May 31, 2017 ACBS Research Department Tel: (+84) (8) 3823 4159 (ext: 303) www.acbs.com.vn Bloomberg: ACBS <GO> 1 MBB Update- HOLD 31-May-17 Ms. Uyen Nguyen MILITARY COMMERCIAL JOINT STOCK BANK (MBB VN) (+84 8) 3823 4159 - Ext: 303 [email protected] Company Update Recommendation HOLD MBB announced decent business results for 1Q2017. Specifically, MBB’s net interest income hit VND 2,407bn, up 36% YoY, whilst non-interest income was VND 495bn, up 80% YoY. With this, total operating income was VND 2,902bn, up 42% YoY. On the back of those results, total operating expenses rose 31.3% YoY, though CIR decreased from 45.1% in 1Q2016 to 41.7% in 1Q2017, pushing profit before provision expenses up by 50.8% YoY as a result. On the other hand, provision expenses increased sharply, reaching VND 579bn, up 1.5 times when compared to the year prior, and as a consequence MBB recorded VND 1,112bn in EBT, up 26% YoY and exceeding the 25% plan for 2017. HSX: MBB Banking 20,400 Target price (VND) Current price (VND) Expected share price return 19,000 +7.4% Expected dividend yield Expected total return +3.2% +10.6% In 1Q2017, MBB’s credit growth was 0.43%, in which outstanding loans to customers reached VND 151,381bn while fund mobilization growth was negative 6.4% YTD (customers’ deposit reached VND 182,410bn). NIM improved from 3.58% in 2016 to 3.71% thanks to the extra weight from loans to individuals (29.89% at the end of 2016 to 31.55% at the end of 1Q2017). Total assets hit VND 250,066bn, down 2.4% YTD. Stock performance (%) YTD Absolute Relative 41.4 29.0 1M 3M 20.3 17.0 12M 35.7 31.2 33.3 9.0 Source: Bloomberg Price-Volume '000 shares 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 20 15 10 5 0 05/16 09/16 01/17 05/17 Ownership Viettel 15.79% SCIC Vietnam Helicopter Corp. 10.53% 8.39% SaiGon Newport Vietcombank 8.05% 6.95% Stock Statistics 31-5-17 Bloomberg code MBB VN 52-week range (VND) Shares O/S (m) Mkt cap (VND bn) Mkt cap (USD m) Foreign room left (%) Est. free float (m) 3m avg daily vol (shrs) VND/USD Index: VNIndex / HNX 13,100 - 19,700 1,713 32,542 1,435 0.0 49.8 1,560,254 Thousands 25 VND '000 MBB's non-performing loans as of the end of 1Q2017 were VND2,020 billion, representing 1.33% of total outstanding loans, up slightly from 1.32% at the beginning of the year. However, Tier 4 & 5 debts increased sharply (up 53% and 39% YTD respectively) hence provision expenses increased sharply when compared to the year prior. For 2017, MBB plans to increase its chartered capital by VND1,028 bn, to VND18,155 bn, through the issuance of 85.6 million shares (2016 2nd dividend payment of 5%) and 17 million ESOP shares with an offer price of 10,000 VND / share. For 2017, we are projecting 18% credit growth and 10% fund mobilization growth. NIM could improve slightly from 3.58% in 2016 to 3.6% in 2017. We forecast 2017 EBT at VND4,647 bn, ROE of 14%, ROA of 1.4%, EPS of VND 2,087, and a book value of VND15,520. Using the Residual Income and Price-To-Book ratio methods, we value MBB shares at VND20,400, and change our recommendation to HOLD. Net Interest Income (VNDbn) Growth (%) Provision expenses ( VNDbn ) Growth (%) Net Profit ( VNDbn ) Growth (%) EPS (bonus-adjusted, VND) Growth (%) NIM(%) NPL (%) ROE (%) PER (times) PBR (times) Dividend yield (%) 2015 7,319 4% 2,102 4% 2,528 2% 1,658 -13% 3.72% 1.61% 12.91% 11.5 1.35 2.6% 2016 7,979 9% 2,030 -3% 2,855 13% 1,642 -1% 3.58% 1.32% 11.91% 11.6 1.28 3.2% 2017F 9,149 15% 1,653 -19% 3,681 29% 2,087 27% 3.60% 1.33% 13.75% 9.1 1.22 3.2% 2018F 10,465 14% 1,671 1% 4,296 17% 2,424 16% 3.65% 1.33% 14.43% 7.8 1.15 3.2% 2019F 11,919 14% 1,850 11% 4,939 15% 2,787 15% 3.65% 1.33% 14.84% 6.8 1.08 3.2% 22,680 739.15/94.27 ACBS Research Department Tel: (+84) (8) 3823 4159 (ext: 303) www.acbs.com.vn Bloomberg: ACBS <GO> 2 MBB Update- HOLD 31-May-17 MBB FINANCIALS MODEL (VND bn except where stated) Price (VND): 19,000 Target (VND): 20,400 Mkt cap (VND bn): 32,542 2015 2016 2017F 2018F 2019F 7,319 7,979 9,149 10,465 11,919 Net fee & commission income 544 683 774 879 997 Net gain from trading foreign currencies 159 113 119 125 131 Net gain from trading of trading securities 134 101 141 154 169 Net other income 525 877 618 544 651 92 102 59 65 72 Total operating income 8,772 9,855 10,861 12,231 13,938 Operating expenses 3,449 4,175 4,562 5,137 5,854 39% 42% 42% 42% 42% Profit before provision for credit losses 5,323 5,681 6,299 7,094 8,084 Provision for credit losses 2,102 2,030 1,653 1,671 1,850 Profit before tax 3,221 3,651 4,647 5,423 6,234 Profit after tax 2,512 2,884 3,717 4,338 4,987 Net profit 2,528 2,855 3,681 4,296 4,939 EPS (VND) - unadjusted 1,832 1,724 2,087 2,308 2,527 0.90 0.95 1.00 1.05 1.10 Adjusted EPS (VND) 1,658 1,642 2,087 2,424 2,787 EPS growth (%) -13% -1% 27% 16% 15% Net interest income Income from investment in other entities Cost to income ration (CIR) (%) Bonus factor (x) KEY CASHFLOW AND BS ITEMS 2015 2016 2017F 2018F 2019F 121,349 150,738 177,870 209,887 247,667 21% 24% 18% 18% 18% 181,565 194,812 214,294 246,438 283,403 8% 7% 10% 15% 15% Chartered capital 16,000 17,127 18,155 19,063 20,016 Shareholders' equity 22,593 25,352 28,177 31,383 35,178 BVPS (VND) 14,121 14,802 15,520 16,463 17,575 Total assets 221,042 256,259 286,650 325,420 371,037 2015 2016 2017F 2018F 2019F NIM(%) 3.72% 3.58% 3.60% 3.65% 3.65% NPL (%) 1.61% 1.32% 1.33% 1.33% 1.33% ROE (%) 12.91% 11.91% 13.75% 14.43% 14.84% ROA (%) 1.20% 1.20% 1.36% 1.40% 1.42% PER (x) 11.5 11.6 9.1 7.8 6.8 PBR (x) 1.35 1.28 1.22 1.15 1.08 2.6% 3.2% 3.2% 3.2% 3.2% Loans outstanding Loans growth (%) Customer deposits Deposit growth (%) KEY RETURN AND VALUATION RATIOS Dividend yield (%) ACBS Research Department Tel: (+84) (8) 3823 4159 (ext: 303) www.acbs.com.vn Bloomberg: ACBS <GO> 3 MBB Update- HOLD 31-May-17 CONTACTS Ho Chi Minh City Head Office Hanoi Office 41, Mac Dinh Chi, Dist. 1, Ho Chi Minh City Tel: (+84 8) 3823 4159 Fax: (+84 8) 3823 5060 10 Phan Chu Trinh, HoanKiem Dist., Ha Noi Tel: (+84 4) 3942 9395 Fax: (+84 4)3942 9407 RESEARCH DEPARMENT Analyst – Oil & Gas Hung Phan (+84 8) 3823 4159 (x354) [email protected] Manager – Industry Coverage Uyen Nguyen (+84 8) 3823 4159 (x303) [email protected] Associate – Consumerrelated, Technology Chi Luong (+84 8) 3823 4159 (x327) [email protected] Associate – Steel, Logistics, Agri, Power Yen Tran (+84 8) 3823 4159 (x326) [email protected] Associate– Property Truc Pham (+84 8) 3823 4159 (x303) [email protected] Analyst – Steel, Power Cuong Nguyen (+84 8) 3823 4159 (x250) [email protected] Analyst– Property Hung Cao (+84 8) 38234159 (x250) [email protected] Analyst – Macro Vi PhucTran (+84 8) 3823 4159 (x250) [email protected] Analyst – Consumerrelated, Technology Trung Tran (+84 8) 3823 4159 (x351) [email protected] INSTITUTIONAL CLIENT DIVISION Director - Head of Institutional Client Tyler Cheung (+84 8) 54 043 070 [email protected] Manager - Trading Hanh Huynh (+84 8) 5404 6632 [email protected] Trader Hang Nguyen (+84-8) 38234160 [email protected] Senior Associate Institutional Client Hung Dang (+84 8) 3823 4798 [email protected] Senior Associate Institutional Client Diep Phan (+84 8) 3823 4159 (x307) [email protected] Trader Thanh Tran (+84-8) 54046626 [email protected] Trader ManhTran (+84-8) 54046630 [email protected] ACBS Research Department Tel: (+84) (8) 3823 4159 (ext: 303) www.acbs.com.vn Bloomberg: ACBS <GO> 4 MBB Update- HOLD 31-May-17 DISCLAIMER Our Recommendation System BUY: where we believe prospective 12 month VND total return (including dividends) will be 15% or more. HOLD: where we believe it will be -15% to 15%. SELL: where we believe it will be lower than -15%. Analyst Certification(s) We, the author(s) of this report, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures ACBS and/or an affiliate thereof (hereby collectively called ACBS) did or may seek to do business with companies covered in this report as its routine business. ACBS's proprietary trading accounts may have a position in such companies’ securities. As a result, the investor should be aware that ACBS may have a conflict of interest from time to time. 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ACBS Research Department Tel: (+84) (8) 3823 4159 (ext: 303) www.acbs.com.vn Bloomberg: ACBS <GO> 5