SIP Update – OUTPERFORM

SAIGON VRG INVESTMENT CORPORATION (SIP VN)

2023 result was in line with ACBS’s forecast. Change recommendation from Buy to Outperform as stock price has increased by 40% from the updated report on December 5, 2023. Increase target price by 20% to VND93,500/share mainly thanks to removing liquidity discount rate when stock volume improved from January 2024 (up by two times compared with the average volume in 2023).

Business results in 2023 increased slightly with revenue of VND6,676 bn (+11% YoY) and PAT of VND1,037 bn (+3% YoY), equivalent to 106% of our forecast and 120% of the company’s profit target. Of which, 2023 electricity and water supply revenue reached nearly VND5.6 trn (+12% YoY), accounting for 83% of total revenue. The growth of this segment was mainly driven by a 4% YoY increase in electricity volume distributed in SIP’s industrial parks (IPs) and a 2.6% growth in average electricity price.

IP rental revenue was VND361 bn (+6.1% YoY) thanks to the annual booking method and an average increase of 10% YoY of rental price. Leasing activity in 2023 was modest with 20 ha leased at Phuoc Dong IP, virtually unchanged compared to last year. The company plans to lease around 50 ha in 2024, but from a conservative perspective, we expect the company to lease around 30 ha.

Net Cash/Equity ratio reached 52.9%, still in the Top 3 highest in the industry

In 2023, total debts increased by ~VND1 trn to nearly VND1.7 trn while cash and cash equivalents decreased by nearly VND400 bn to ~VND3.8 trn VND, equivalent to nearly 1/5 of total assets. Net cash/Equity ratio decreased from 96.2% to 52.9% in 2023 but remained well above the industry median of 10.2%.

Lent around VND1.3 trn to VCBS and CTS at YE2023

To take advantage of idle cash, SIP lent over VND300 bn to Vietcombank Securities Company (VCBS) with an interest rate of 4.7-7%/year and nearly VND1 trn to Vietinbank Securities Company (CTS) with an interest rate of 5-7%/year. The total balance of these two loans was around VND1.3 trn to replace for the VND1.8 trn lent to the largest shareholder, An Loc JSC, which was fully repaid in 2Q2023.

Forecast and Valuation

Our 2024 forecast is almost unchanged with revenue of over VND7.1 trn (+7% YoY) and PAT of ~VND1.1 trn (+8% YoY) mainly thanks to an increase in the number of tenants operating at Phuoc Dong IP and more rooftop solar panels installed. Using the NAV method, we suggest a target price of VND93,500/share at YE2024, 20% higher than the previous target price mainly due to eliminating liquidity discount when stock volume has begun to improve from January 2024. Change recommendation from Buy to Outperform because stock price has increased by 40% since the updated report on 5/12/2023.