Industrial real estate stocks will flourish

All economies are keeping a close eye on Donald Trump's win. Foreign direct investment (FDI) is projected to move dramatically in reaction to this election, with predictions that FDI inflows recorded in Vietnam would increase sharply post-election, bolstering IRE stocks.

Numerous Advantages

Based on the Q3 and first nine months of 2024 company outcomes, IRE stocks appear to have a good value potential. Fiin's Q3/2024 data, which was updated on November 1, 2024, reveals that 1,060 listed businesses (representing 98.5% of the market capitalization) declared their business results, with total after-tax earnings growing by 21.6% compared to the same time in 2023. This growth rate has stayed consistent over the last two quarters (increased 20.7% year on year in Q1 and 21.4% in Q2).

Consumer products (retail, food, and livestock), exports (seafood and textiles), materials (rubber and fertilizers), power, and IRE all had significant profit increases. In contrast, the insurance, securities, dairy, personal consumption goods, oil and gas, chemicals, pharmaceuticals, and telecommunications industries all saw reductions. Banking, steel, and information technology sectors all had slower growth.

Unlike the residential real estate industry, IRE remains a "fertile field" for investors, whilst other real estate segments seem dreary or "frozen." According to MBS figures, this sector's profit growth rate reached 169%, backed by consistent FDI inflow and other positive conditions.

However, according to Shinhan Securities, this sector shows clear divergence, with companies that have available land for lease benefiting from ample FDI flows, resulting in significant revenue and profit growth. Particularly, IRE stocks have improved gross profit margins due to rising land prices in major provinces.

Medium- and Long-Term Outlook

Returning to MBS study, analysts report that "industrial parks (IPs) in Vietnam are progressively establishing themselves as appealing locations for international investors." With 418 active IPs, Vietnam has attracted 35-40% of total FDI and employed over 4 million people. High occupancy rates and steady rises in land rental prices indicate that this sector has the potential to develop.

Areas around industrial clusters are consequently becoming "magnets" for investors, presenting a perfect opportunity for the IRE sector to accelerate and grow rapidly.

In Q4/2024 projections, particularly with anticipated capital flows related to the U.S. presidential election results, Mr. Doan Minh Tuan, Head of Research and Analysis at FIDT, has highlighted major firms:

IDC – The company’s land lease sales could increase from Q4/2024 due to large FDI tenants post-election. IDC owns a substantial clean land reserve in key IPs.

KBC – This company may benefit if Mr. Trump is re-elected, as KBC has an agreement with the Trump Organization for a major golf and hotel project in Hung Yen, which may be expedited.

SIP – The company recorded 74 hectares of land lease sales in the first nine months of 2024, primarily to a UK-based textile customer (50 ha) and SLP (16 ha), compared to about 20 ha in 2023.

SZC – The company could record an 18-hectare lease contract for Tripod at Chau Duc IP in Q4/2024 or 2025, significantly boosting profit growth.

Meanwhile, Mr. Le Duc Tien, Securities Analyst at Shinhan Bank, rates three leading stocks as highly valued: Industrial Investment and Development Corporation—Becamex (HoSE: BCM), with a target price of VND 80,900 per share (up 21%); IDICO (IDC), with a target price of VND 64,800 per share (up 15%); and Sonadezi Chau Duc (SZC), with a target price of VND 43,500 per share.

These organizations have similar strengths in terms of available land for lease and remarkable business performance, as well as shared concerns such as reliance on FDI (which may diminish), decreasing leasing demand, or poor project progress. Each firm has specific risks, such as debt (BCM), legal concerns, and compensation fees for industrial park property (SZC).