VRE Flash note – BUY

VINCOM RETAIL JSC (VRE VN)

In 2Q2024, VRE posted revenue of VND2,479 bn (+14% YoY) and PAT of VND1,021 bn (+2% YoY). For 1H2024, VRE recorded revenue of VND4,733 bn (+15% YoY) and PAT of over VND2,104 bn (+4% YoY), completing 50% and 48% of targets, respectively.

VRE opened 3 new malls (VCP Dien Bien Phu and VCP Ha Giang and VMM Grand Park) in June. Thus, at the end of 2Q2024, total number of malls increased to 86 and total GFA grew by 67,000 sqm to over 1.8mn sqm. Average occupancy rate in 2Q2024 was 83.9%, down by 1.6 pp YoY but up 1.1 pp QoQ.

Revenue from leasing activities in 2Q2024 decreased slightly by 0.2% YoY, to VND1,940bn as the newly leased area in 3 new malls did not contribute much in this period. Segmented gross margin declined to 53.9% (-3.9 pp YoY) mainly due to: (1) higher energy cost given higher electricity price and higher consumption volume during hot weather and (2) VND100bn of leasing revenue from commercial streets had a margin of 40-50% which was lower than the normal margin of malls.

Sales of properties rose by 137% YoY, to VND467bn thanks to higher number of delivered shophouses (104 in Dong Ha Quang Tri in 2Q2024 vs 23 in Dien Bien Phu in 2Q2023). Segmented gross margin was 33.5%, much lower than 45% in 2Q2023 and our forecast of 44%.

In 2H2024, VRE is expected to open 2 new malls (VCP Bac Giang and VCP Dong Ha Quang Tri) with additional GFA of 27,600 sqm. VMM Ocean City will be rescheduled from the end of 2024 to Apr 2025 due to: (1) waiting for more residents moving to Vinhomes Ocean City after the Tet holiday to have higher consumption demand and (2) economic needs test for store openings of some international tenants took longer than expected.

In April, VRE announced to purchase 3 shophouse projects in Quang Ninh, Hai Phong and Nha Trang from Vinhomes (VHM), Vingroup (VIC) and Vinwonders Nha Trang. The Nha Trang project was behind schedule, thus VRE decided to cancel it and will receive its deposit of VND1.3trn back from VinWonders Nha Trang. The other two projects are on track and VRE expects to launch these in early 2025.

At the end of 2Q2024, VRE had over VND16.1trn of deposits for business and investment purposes, up by 25% compared to YE2023, of which VND13.8trn associated with Vingroup and related parties, up by 16% compared to YE2023.

Quick comment: As revenue from leasing activities and gross margin in 1H2024 were lower than expected, we adjust 2024 total revenue down by 6% to ~VND9.1 trn (-7% YoY) and PAT by 10% to ~VND4.2 trn (-6% YoY). Given a decline in cash and cash equivalent balance and lower 2024 profit, we adjust target price at YE2024 down by 16% to VND29,200/share, using the combination of NAV, P/E and P/B methods.