05/05/2020 - 14:51
VND: Challenges exhibited in 1Q20 results
VND’s 1Q20 earnings declined -61% QoQ and -35% YoY. The company has achieved 18% of our full-year target in the first quarter, a reasonable result considering March’s market mayhem.
Details
Net brokerage income was up 7% QoQ but down -12% YoY. Based on VND’s market share of 7.0% on the HOSE, 7.6% on HNX, and 12.6% on UPCom, we estimate gross commissions were 20bps which is in line with the other three brokers under coverage (all of which posted an estimated 19bps). Est. net commissions of 12bps were also the highest in our coverage and the highest over the past four quarters.
VND posted a prop trading loss of –VND40bn (-135% QoQ / -218% YoY). Specifically, the company posted net realized gains of VND39bn (-26% QoQ / +23% YoY) but unrealized mark-to-market losses of VND79bn in 1Q20. VND’s FVPL book declined -10% QoQ to reach 12% of total assets, indicating that it did not double down in March.
Margin lending revenues (-30% QoQ / +9% YoY) were in line with its 30% QoQ fall in margin loans, where its market share fell to 4just .2%. Based on the average gross margin loans on the 4Q19 and 1Q20 balance sheet, gross lending yields would have been 15.0% in 1Q20 (note: this estimate is likely too high).
| VND: 1Q20 Results round-up | 1Q20 (VND bn) | YoY | QoQ |
| Gross brokerage income | 80 | -12% | 1% |
| Net brokerage income | 47 | -17% | 7% |
| Service fees | 0 | -98% | -100% |
| Gross margin income | 95 | 9% | -30% |
| Prop trading | -40 | -218% | -135% |
| Gains from AFS assets | 45 | 6% | 3393% |
| Gains from HTM assets | 106 | 76% | -1% |
| Net operating income | 222 | -12% | -35% |
| PBT | 72 | -36% | -63% |
| Reported PATMI | 58 | -35% | -61% |
Source: Company data
Our view: Overall, this was not a bad earnings result considering the carnage that was March. VND appears to be holding on to brokerage profitability but forgoing market share of margin lending, which is inherently a more profitable business. We see VND as primarily a retail-focused brokerage with a leading online trading platform.
However, retail brokerage in Vietnam is experiencing an intense competitive crunch and VND’s strategy has yet to bear fruit in terms of earnings—or share price performance. Its low liquidity and sub-$100m market cap could also be a hurdle for many investors. VND is trading at 0.6x 2020 P/B, just off its 52-week low.
