KBC Update – OUTPERFORM

KINH BAC CITY DEVELOPMENT HOLDING CORPORATION JSC (KBC VN)

2023 business results were in line with ACBS’s forecast. Reiterate our Outperform recommendation with a target price of VND37,400/share by YE2024, up by 6% compared to the previous target price.

Kinh Bac announced positive 2023 business results with net revenue of over VND5.6 trn (+494% YoY) and PAT of over VND2.2 trn (+41% YoY), equivalent to 99% of ACBS’s forecast and 56% of the company’s profit target. The reason for missing the target was that Nam Son Hap Linh and Quang Chau industrial parks (IPs) have not completed site clearance, thus KBC could not deliver and record revenue as planned. Therefore, delivery of around 30 ha at Nam Son Hap Linh, Quang Chau and Tan Phu Trung IPs will be rescheduled from 4Q2023 to 1Q2024.

In 2023, KBC signed nearly 150 ha of industrial land (+41% YoY) thanks to: (1) the China+1 trend continuing to be promoted, (2) the location of KBC’s IPs is very favorable and (3) the company has attracted many key tenants which encourages satellite companies to expand/relocate their production bases to Vietnam.

In 2024, KBC plans to sign about 100-150 ha, of which 100 ha from existing IPs and 50 ha from Trang Due 3 IP if this IP is approved soon and the company can open for lease quickly. Currently, LG and its satellite companies plan to lease around 62-100 ha at this IP.  We expect that Trang Due 3 IP will be approved soon and the company will sign a total of 126 ha in 2024.

Due to changes in Hai Phong City general planning, Trang Cat urban area project will have an additional 73 ha of NSA and KBC may pay an additional VND4 trn of land use fees. If the company arranges enough money to pay the land use fees in this year and large foreign partners buy 30-40 ha of Trang Due 3 uraban area per year, this project will be the key growth driver in the coming years for KBC.

After paying off all corporate bonds in 2023, the company’s financial status is quite healthy with net debt of VND954 bn at YE2023, down by over VND2.5 trn compared to the beginning of the year. Net Debt/Equity ratio also declined from 19.7% to 9.7%.

Our forecast for 2024 is almost unchanged with revenue of ~VND6.3 trn (+12% YoY) and PAT of over VND2.2 trn (+ 2% YoY). Using the NAV method, we suggest a target price of VND37,400/share by YE2024, up by 6% compared to the previous target price and reiterate our Outperform recommendation for this stock.