SIP Update – OUTPERFORM

SAIGON VRG INVESTMENT CORPORATION (SIP VN)

1Q2024 business results were in line with ACBS’s forecast. Reiterate Outperform recommendation. However, we adjusted the target price at YE2024 up by 9% to VND102,300/share, equivalent to a 13% expected share price return given an increase in net cash and accelerated leasing progress at Loc An Binh Son IP.

1Q2024 business results were positive with revenue of over VND1.8 trn (+31% YoY) and PAT of VND258 bn (+44% YoY), equivalent to 25% and 23% of our full-year forecast.

Revenue of the power and water supply segment grew by 31% YoY to nearly VND1.5 trn, accounting for over 80% of total revenue. Growth mainly came from a ~15% increase in power volume as many tenants operating in power-intensive export sectors such as textiles and garments improved production when receiving more orders. Gross margin of the electricity and water supply segment decreased slightly from 9.6% to 8.2% mainly due to an increase in revenue proportion of the power distribution activity in industrial parks (IPs) which usually has a low gross margin.

IP revenue in 1Q2024 was flat at VND94 bn (+3% YoY) given annual accounting method and some newly signed contracts in 4Q2023 have not been recorded revenues. The leasing target for 2024 is 47ha (+153% YoY), including 30ha at Phuoc Dong IP, 6ha at Dong Nam IP, 6ha at Le Minh Xuan 3 IP and 5ha at Loc An Binh Son IP. In 1Q2024, SIP did not sign any new contract as some transactions were still in the negotiation stage.

According to the company, Loc An Binh Son IP’s leasing activity was positive when signing a lease of 16.3 ha with an investor operating in logistics. Phase 1 of the 9.8ha ready-built factory and warehouse project also signed 6 factories out of a total of 8 factories and the remaining 2 factories were in the negotiation process. Phase 2 of 9.4 ha will be implemented later. In 2024, SIP plans to lease 5 ha at this IP which is beyond our previous forecast. Thus, we increased the total new IP area signed in 2024 by 5 ha to 35 ha.

Net Cash/Equity ratio was 64%, still in the Top 3 highest in the industry.

In 1Q2024, total debts increased by VND361 bn to over VND2 trn while cash and cash equivalents increased by over VND800 bn to nearly VND4.8 trn, accounting for over 1/5 of total assets. Net Cash/Equity ratio increased from 52.9% to 64.0% in 1Q2024, much higher than the industry median of 16.5%.

Forecast and Valuation

Our 2024 forecast is almost unchanged with estimated revenue of ~VND7.3 trn (+9% YoY) and estimates PAT of ~VND1.1 trn (+8% YoY). Using the NAV method, we suggest a target price of VND102,300/share by YE2024 which is 9% higher than the previous target price mainly thanks to an increase of nearly VND500 bn in net cash and accelerating leasing progress at Loc An Binh Son IP (i.e. adjust new leasing from 2024 compared to the previous forecast of 2026 when Long Thanh Airport Phase 1 comes into operation). Reiterate our Outperform recommendation.