VRE Flash note – BUY

VINCOM RETAIL JSC (VRE VN)

A flat 4Q2024 and a slight decrease in 2024 business results which were in line with our forecast. The decline was mainly due to a lower number of shophouses delivered when handovers at existing projects near completion. Keep our 2025 forecast and our Buy rating unchanged for VRE with a YE2025 target price of VND21,800/share, down by 22% compared to the previous target price given higher net debt and cost of equity.

VRE posted a flat 4Q2024 result with revenue of VND2,128 bn (-9% YoY) and NPAT of VND1,085 bn (+2% YoY). The decline in the top line was mainly due to a 78% decline in property sales to VND60 bn which was driven by a lower number of shophouses delivered (11 units vs 28 units) although rental revenue from operating malls still grew at 4% YoY, to VND2,027 bn. 

VRE posted a slight decline in 2024 with revenue of VND8,939 bn (-9% YoY) and NPAT of VND4,096 bn (-7% YoY), completing 92% of the company’s target and 98% of our forecast. The decline resulted from a 53% YoY drop in property sales, to VND839 bn which was driven by a lower number of shophouses delivered (167 units mainly at Dong Ha Quang Tri project in 2024 vs 346 units in 2023).

Regarding property leasing segment, revenue slightly improved to VND2,027 bn (+4% YoY) in 4Q2024 and VND7,878 bn in 2024 (+1% YoY) mainly thanks to 5 new malls opened in 2024 (VMM Grand Park, VCP Dien Bien Phu, VCP Ha Giang, VCP Bac Giang and VCP Dong Ha Quang Tri) which added 95,000 sqm of retail GFA. On the other hand, average occupancy rate slightly dropped from 84.8% in 2023 to 84.2% in 2024 mainly due to closure of some entertainment tenants severely impacted by Covid-19 and some VinFast showrooms amounted to 40,000 sqm of vacant spaces in some malls. The good news was that average occupancy rates were trending up from a trough 82.8% in 1Q2024 to 85.4% in 4Q2024 (+0.6 ppts QoQ and +2.4 ppts YoY). 

Gross margin of leasing segment in 2024 declined from 58.4% to 55.8% mainly due to: (1) a 10% YoY increase in energy cost given higher electricity price announced by EVN and higher volume given 5 new shopping malls, (2) lower occupancy rate, (3) leasing revenue from commercial streets had a margin of 40-50% which was lower than the normal margin of malls.

Leasing NOI also went down by 2% YoY, to VND7,078 bn in 2024 mainly due to VND240bn of provision for bad debts incurred by an entertainment tenants which have been affected by the COVID and filed for bankruptcy.