by NGOC ANH 02/01/2023, 02:38

What stocks to watch in the industrial property sector?

We like PHR and BCM for long-term investment while NTC is in our watchlist, said VNDirect.

Many investors focus on industrial property stocks

>> https://en.diendandoanhnghiep.vn/creating-an-quot-ecosystemquot-fornbsp-the-industrial-park-n35487.html

Despite a slowdown in land conversion efforts over the next few quarters, PHR's prospects for its IP business remain strong. Over the course of FY26-30F, PHR plans to build five IPs totaling more than 2,700ha. According to VNDirect, PHR will report one-time gains in 4Q22 and 1Q23 that are equal to VND400 billion and VND207 billion, respectively. This will cause PHR's earnings to increase by 117.6% year over year in FY22F and to decline by just 2.7% in FY23F.

PHR stock has lost almost 53% of its value since peaking in March 2022 and is currently trading at 7.9x FY22 P/E, which is less than the 17.6x average of its peers. VNDirect considers the stock's risk-reward ratio to be fairly appealing at this moment, especially with its high dividend yield of 9.9%. Re-catalyst involves quicker than anticipated approval of the land's legal status. Below-average rubber prices and a slower-than-expected land clearing process are two potential downsides.

The largest listed IP developer in terms of the amount of leasable land bank (944ha) is BCM, one of the nation's top industrial park developers with six operational industrial parks encompassing more than 4,000ha. A slower project approval procedure and few finance sources will provide greater difficulties for IP developers during the next two years, according to VNDirect. But this probably creates opportunities for developers who have a land bank that is available for lease, like BCM. Strong earnings growth between FY22 and FY23 (58.2 to 84.7% yoy).

Due to the one-time gain of around VND5,000bn from the transfer of CapitaLand's interest in the Binh Duong New City project land, VNDirect anticipates a sharp increase in residential property revenue in FY23F. Thanks to the contributions of Cay Truong IP and Bau Bang expansion IP, revenue from the IP business will increase consistently over the course of FY22-23F by 17% yoy - 44% yoy. favourable catalysts 1) quicker sales of IP or real estate, and 2) earlier introductions of new IPs. Lower-than-expected IP land sales, delays in acquiring permissions for future launches, and higher-than-expected leverage are potential downside risks that might significantly reduce profitability.

SZC is well-positioned to capture the growing demand for industrial property in the South. SZC with the parent’s advantage, Sonadezi Corporation, with more than 30-year experiences is attracting investors. SZC has sizeable land bank (more than 600ha) and competitive rental prices among listed IP companies in Ba Ria-Vung Tau, a major manufacturing hub in the South. Chau Duc IP’ leasable area is still guaranteed to remain steady for upcoming years.

VNDirect estimates available leasable area of this IP around 581ha, which will continue to be leased from 40-60ha per year in FY23-32F. Although slower-than-expected handover, SZC’s residential business will be the growth engine with FY23-24F revenue contribution of 28.3%/43.0%, respectively. Upside catalysts: 1) higher-than-expected rental price and lease area of Chau Duc IP, 2) Sooner-than-expected implement time of Sonadezi Huu Phuoc’s phase 2. Downside risks are: 1) higher-than-expected the new price for land compensation, 2) delays in obtaining permits for residential projects.

>> What are the prospects for industrial property in 2023?

VNDirect believes KBC is well-positioned to capture the growing demand for IP as 1) KBC has a sizeable ready-to-lease industrial land bank with Trang Due 3 IP likely starting from 2023F; 2) KBC holds the leading position in attracting FDI with several tech giants in its tenant portfolio, including Samsung Electronics Vietnam in Que Vo IP, LG Electronics in Trang Due IPs, Foxconn in Quang Chau IP.

In addition, KBC is now completing legal procedures and ground filling at Trang Cat urban area project (581ha), which has a potential GDV of c.VND50,000bn (based on our estimate). The company plans for its first bulk sales of 30ha in FY22-23F. VNDirect believes these projects should provide strong support for KBC’s long-term earnings growth.

“Potential upside risks could come from faster IP or residential land sales and whether KBC can clear legal hurdles to start its new IPs. Key downside risks 1) worse-thanexpected IP land sales, 2) regulatory delays in Trang Cat project and Trang Due 3 IP, and 3) delays in booking revenue from residential projects”, said VNDirect.

According to NTC’s management, legal procedures for its new IP namely Nam Tan Uyen IP phase 2 (NTC3) with a total area of 346ha had been tackled bottleneck. The company is likely to monetize this new IP since early 2023F. Besides, NTC is one of the most richcash listed property companies with a net cash of VND1,068bn as of end-3Q22, coupled with a stable income from its associates, we estimate NTC could book c. VND180-200bn in net financial income, equivalent to 18-20% of FY23F pre-tax profit. VNDirect forecasts FY23F net profit to surge 242% yoy to VND857bn on new IP contribution.