NLG Update – OUTPERFORM

NAM LONG INVESTMENT CORPORATION (NLG VN)

2Q2024 profit mainly came from the 25% transfer transaction at Paragon Dai Phuoc project. Revise down NPATMI 2024 forecast by 11% to VND 535bn (+11% YoY). Roll forward valuation to 2025 with a target price of VND46,900/share and change our rating from Buy to Outperform as stock price increased by 14% since our update report in April, 2024.

NLG reported 2Q2024 revenue of VND252bn (-74% YoY) and NPATMI of VND145bn (+20% YoY). The decline in revenue was mainly due to lower units delivered (70 units at Southgate, Izumi and Akari compared with 99 units in 2Q2023). The increase in NPATMI was mainly thanks to financial profit of VND231bn from a 25% transfer transaction at Paragon Dai Phuoc to Nishi Nippon Railroad with a value of VND662bn.

NLG completed only 7% of 2024’s revenue target and 13% of profit target in 1H2024. The company posted low result in 1H2024 with revenue of VND457bn (-62% YoY) and NPATMI of VND68bn (-47% YoY) given the majority of revenue and profit will be booked in the 4Q2024 when around 70% of Akari – Phase 2 is delivered with estimated revenue of VND3.4trn. 

Sales performance continued to recover. In 2Q2024, NLG sold 648 units (+46% QoQ and +286% YoY) with a total value of over VND1.5trn (+29% QoQ and +140% YoY), of which Southgate and Akari were two best sellers, contributing 45% and 37% to total sales value, respectively. For 1H2024, NLG sold nearly 1,100 units (5 times higher than 1H2023) with a total value of nearly VND2.7trn (three times higher than 1H2023). We expect 2024 presales at around VND6.4trn (+61% YoY) and 2025 presales at VND9.7trn (+52% YoY).

NLG’s financial health was still in a good position. In 1H2024 net debt increased by VND975bn, to over VND6.5trn and Net debt/Equity ratio increased from 18.6% to 26.2%, in line with the sector median of 26.7%. In 3Q2024, the company plans to have 2 tranches of private issuance of corporate bonds with a total value of VND950bn (VND500bn and VND450bn) for 36 months, fixed interest rate of 9.78%/year in the first four terms and fluctuated interest rate for the following terms. The proceed is used to pay back the principal of VND950bn corporate bonds due in Sep 2024.

Given deliveries at Southgate and Izumi was under our expectation and delivery at Can Tho project depends on land use fee payment progress, we adjust 2024 estimated revenue down by 12% to VND5,341bn and NPATMI by 11% to VND535bn. For 2025, we expect revenue at VND6,234bn (+17% YoY) and NPATMI at VND586bn (+10% YoY) thanks to deliveries at Southgate, Akari, Can Tho, Mizuki and Izumi projects. Using the NAV method, we roll forward target price to VND46,900 at YE2025, up by 9% compared to the 2024 target price. Change our rating from Buy to Outperform as stock price increased by 14% since our update report in April, 2024.