MBB_BUY_TP 28,458 VND_Upside 22.5%_Update 2Q2019_BSC Company Update_05092019_EN

VALUATION
We recommend BUY for MBB with a target price of VND 28,458/share, upside 25% based on P/BF = 1.5x valuation method due to (1) High profitability and well-controlled asset quality, (2) Valuation is cheap (P/BF = 1.2x), (3) The strategic capital sale to the foreign partner is expected in 2019 to help MBB stock be revalued.

BUSINESS RESULTS FORECAST
We revised MBB's TOI and PBT forecasts in 2019 to -1.4%/+3.5% with a change in our view of credit growth (from 14% to 17% for the parent bank, 37% for M Credit), the CASA rate decreased to 34.3% while CIR is kept at 45%.

CATALYST
(1) Selling strategic capital to foreign partner
(2) Cheap valuation.

INVESTMENT RISKS
(1) M Credit is more risky, but it does not account for a large proportion in the lending structure
(2) Decreasing CASA rate raises capital cost.

INVESTMENT OUTLOOK (Refer to page 2 for details)
Profitability is kept high compared to the whole industry. (1) Net interest income was VND 4,395 billion (+ 25.4% yoy), (2) Non-interest income grew strongly from fee income (+ 59% yoy).
Asset quality is good, however, the credit expansion of M Credit may affect MBB's overall results. Consolidated bank NPL = 1.18%, of which parent bank = 1.08%, M Credit = 11%. Bad debt coverage ratio (LLCR) = 97.6%, higher than the industry average, helps ensure the operation of the bank. CAR Basel II = 10.5%. 
Cheap valuation and expectation from strategic capital sales. P/B F 2019 = 1.2x, attractive with a growing position and asset quality. The strategic sale of capital to foreign shareholders may help revaluate MBB in short term.