What outlook for BCM?

Rising debts

In past years, BCM concentrated mostly on exploiting and expanding industrial parks and urban regions in Binh Duong. To meet the new development objectives, BCM is exploring and developing new projects in additional provinces, including Binh Phuoc, Binh Dinh, and Tay Ninh.

Becamex Binh Phuoc Industrial Park has a total size of 2,448 hectares and opened in 2018, although the present occupancy rate is still low at 12%. In 2023-24, its investment capital expanded from VND 780 billion to more than VND 2,000 billion (of which BCM owns 40% and IJC owns 31.7%). Total income is anticipated to be around VND 70,000 billion, with a net profit of around VND 45,000 billion for the remainder of the life.

Becamex VSIP Binh Dinh Industrial Park has 1,374 hectares and was launched in early March 2024. The total investment capital is approximately VND 7,500 billion, of which BCM provides 40%. It is strategically located near to Highway 19C, 25 kilometers from Quy Nhon seaport and 30 kilometers from Phu Cat airport. In the next three years, we predict the average rental land area to be 30-40 hectares, with earnings of VND 450-800 billion each year. In addition, BCM is looking into a new industrial park in Tay Ninh.

Due to the nature of constructing many projects at the same time, BCM has previously raised a significant amount of borrowing funds. At the conclusion of 2Q24, BCM's total debts reached VND 21,273 billion (short-term debts: VND 9,323 billion, long-term debts: VND 11,950 billion), a 7.8% rise from the beginning of 2024, with bond value reaching VND 10,506 billion. BCM's debt/equity ratio was 107%, above the industry average.

Outlook for 2024 business plan

In the second quarter of 2024, BCM generated revenues of VND 1,161.85 billion, a 9.7% decline from the same period, and profit after tax of VND 394.14 billion, a 11.48-fold gain. In the first half of 2024, BCM's revenues were VND 1.973.45 billion, up 4.7% from the same period, and its profit after tax was VND 513.38 billion, up 950.5%.

In 2024, BCM expected overall revenue of VND 9,000 billion, a 2% rise over the same year, and profit after tax of VND 2,350 billion, a 3% increase over 2023. Thus, by the end of the first half of 2024, BCM had accomplished 21.8% of its 2024 profit plan.

In 2024, BCM intends to reach total sales of VND 9,000 billion, or 102% of 2023, pre-tax profit of VND 6,300 billion, or 103% of 2023, and NPAT of VND 2,350 billion, or 103% of 2023. However, MBS believes the 2024 business plan to be rather tough since industrial parks transfer over property slowly and residential real estate is harmed by the economy's slump, which shows no indications of recovery.

BCM intends to issue a further 300 million shares, raising at least VND 15,000 billion. The funds will be utilized to expand Bau Bang Industrial Park and Cay Truong Industrial Park, as well as to enhance capital for VSIP, Becamex Binh Phuoc, Becamex Binh Dinh, and other projects. In addition, the corporation intends to pay cash dividends of 10%.

Opportunities and challenges

BCM's industrial parks will have a better chance of attracting FDI money as Vietnam's diplomatic relations with the United States, Japan, and South Korea improve. Moreover, Cay Truong Industrial Park is steadily being cleared of legal obstacles and will soon be placed into operation within 2-3 years. In addition, BCM intends to issue fresh shares between 2024-2025.

However, MBS suspects that BCM has faced numerous risks, including the risk of an economic recession reducing demand for industrial land; the risk of site clearance delaying project progress; land costs exceeding expectations; Vietnam's macroeconomic policy risks, trade barriers, and regional and global agreements in which Vietnam participates.

MBS suggests a target price of VND 82,500/share for BCM, with a 16% upside (including a 1.4% dividend yield).