KDH Flash note – OUTPERFORM

KHANG DIEN HOUSE TRADING AND INVESTMENT JSC (KDH VN)

A decline in 3Q2024 and 9M2024 results was mainly due to a lower number of low-rise units delivered at Classia project. Keep our 2024 forecast unchanged as we expect the company will deliver and recognize Privia project in 4Q2024. Reiterate our Outperform rating with YE2025 target price of VND38,000/share, down by 10% compared to the previous target price given issuances of 10% stock dividend and 10.8 mn ESOP shares.

KDH recorded low 3Q2024 result with revenue of VND253 bn (-59% YoY) and NPAT of VND66 bn (-68% YoY) mainly due to a lower estimated number of low-rise units delivered at the Classia project (6 units in 3Q2024 vs 18 units in 3Q2023).

The 9M2024 result also declined with revenue of VND1,232 bn (-24% YoY) and NPAT of VND410 bn (-38% YoY), completing 32% and 52% of targets, respectively. The decline was also mainly due to a lower estimated number of low-rise units delivered at the Classia project (16 units in 9M2024 vs 32 units in 9M2023). Gross margin declined from 78.9% to 67.6% because of location of Classia units delivered and gross margin of small land lots delivered.

2024 business result is mainly generated from Classia and Privia and both projects are on track with the company’s targets. At the end of 3Q2024, the Classia project was sold out and delivered 99% accumulatively. Privia project with estimated total revenue of over VND3.5 trn started to be delivered from the middle of October 2024. KDH nearly completes the construction of the low-rise components of Clarita and Emeria projects and expects to launch them at the end of 2024 or 2025 after getting a sales permit. 

To accelerate land use fee payment and land clearance processes before the new land price table of HCMC applied from Oct 31st 2024, KDH raised VND3 trn from a private placement of 110mn share at the average price of VND27,250/share in July, 2024. The company also increased net debt by nearly VND1.9 trn to VND4,493 bn in 9M2024, leading to an increase in Net debt/Equity ratio from 16.8% to 23.8%. 

We keep our 2024 forecast unchanged with revenue of VND4,573 bn (+119% YoY) and NPAT of VND925 bn (+27% YoY) as we expect the company will deliver and recognize Privia project with estimated revenue of over VND3.5 trn in 4Q2024. For 2025, we estimate revenue at VND4,872 bn (+7% YoY) and NPAT at VND1,492 bn (+61% YoY) mainly thanks to the contribution of Clarita and Emeria projects. However, 2025 NPATMI may go sideways and reach VND924 bn because of significant minority interest realized when KDH distributes 49% profit of Clarita and Emeria projects to Keppel. Using NAV method, we achieve a target price of VND38,000/share at YE2025, down by 10% compared to the previous target price given issuances of 10% stock dividend and 10.8 mn ESOP shares. Reiterate Outperform recommendation.