What are the best real estate stocks to watch?

Vinhomes Wonder Park Dan Phuong project

VNDirect said it would like developers that meet the following key criteria: (1) About to launch projects for which they already have construction licenses or land use right (LUR) certificates or have a high likelihood of securing the license/certificate in 2022F; (2) with material exposure to the mid-range and affordable condo segments as these segments are driven by real end-user demand; (3) Buffered by a healthy financial position (low leverage, strong liquidity) to counter the risk of tightening credit for the real estate market as discussed above. Based on these criteria, Vinhomes (VHM), and Khang Dien (KDH), are its top picks.

As for VHM, its total land bank, including land under acquisition, was 16,800ha as of Sep 2021, about 3 times higher than that of the second-ranked company – Novaland, which translates to 16,400ha of residential GFA. This highlights its strong land acquisition and master planning capability, in VNDirect’s view. As of Sept 2021, 90% of its total land bank had not been deployed yet, showing the huge potential of the VHM in the future. This stock company expected FY22F presales to return to its strong trajectory with 51,535 units of presales volume (47.7% YoY) and VND152.1tr of value (109.4% YoY) with the noticeable launches of three new projects including Vinhomes Co Loa, Vinhomes Dream City, and Vinhomes Wonder Park.

With regards to KDH, VNDirect likes it for its scale, financial capacity, huge land bank in HCMC’s sought-after locations (578ha for residential and 110ha for industrial park as of end-3Q21) as well as legally transparent. These factors position KDH well to capture HCMC residential property market recovery since FY22F and stable earnings prospects, in our view. VNDirect projected KDH’s presales value to strongly bounce back in FY22F with four new residential projects and one industrial park (IP) project in HCMC. 

KDH’s upside risks in the short term could come from higher-than-expected average selling prices for five new projects; VNDirect’s mid-to-long-term investment thesis is dependent on whether KDH can clear legal hurdles to start its Tan Tao project. Its downside risks are 1) delays in obtaining permits for new launches and 2) continuous upward trend in construction material prices.

In the context of both volume and price expansion for the residential market along with hospitality property recovery in 2022F, VNDirect expected property agencies such as DXS, CRE, KHG, NRC to take advantage and post a strong set of 2022F results. It likes agencies converting their traditional sales to digital ones to adapt to the disrupted sales activities due to local lockdown and suspended travels.

VNDirect likes Dat Xanh Services (DXS) as it is well-positioned to capture the property demand recovery since 2022F, thanks to its leading position in brokerage property with a 28% market share, along with a strong distribution network spread across all provinces in Vietnam. Besides, its different business model focusing on full-service brokerage brings high efficiency compared to competitors. Especially, with a superior customer database of 7.5 million customers, DXS is poised to be the champion of both primary and secondary brokerage markets as well as auxiliary services. In addition, the technology platform DXRES O2O is expected to maximize its competitive advantage in a consolidating industry. 

VNDirect expected DXS's net profit to reach VND1,551bn (85.7% YoY)/VND2,290bn (47.6% YoY) in FY22-23F, driven by brokerage activities as well as property market recovery. Upside catalyst is a larger-than-expected scale of its distribution contracts. Downside risks include a prolonged pandemic, which would impact brokerage activities and the launch of real estate projects.

For Century Land (CRE), VNDirect likes it as (1) its leading position in brokerage property with 14% market share will help CRE to ride on the resurge of housing demand post-pandemic; (2) recent tie-up with Novaland (NVL) and Vinhomes (VHM) to distribute their projects, will solidify its marketing position in Northern market; and (3) strong investment pipeline ensures a breakthrough for secondary investment segment in 2022F. 

This stock company expected CRE's net profit to reach VND701bn (59.0% YoY) / VND795bn (13.4% YoY) in 2022F/23F, mostly from secondary property investment. Upside catalyst is a larger-than-expected scale of the company’s secondary investment sales. Downside risks include a prolonged pandemic, which would impact brokerage activities and the launch of real estate projects.