CTG update – BUY

NAM LONG INVESTMENT CORPORATION (NLG VN)

Q1 results underwhelmed mainly due to the delays in project transfers, but the full year outlook remains unchanged. We upgrade our recommendation to BUY, with an unchanged target price of 56,600, as NLG appears to have been oversold during the recent market correction. 

Nam Long announced mixed 1Q2022 business results with a 149% YoY increase in net revenue, to VND587bn but a 91% YoY decrease in PAT, to VND33bn. The growth in the top line was mainly thanks to higher units delivered (163 units vs 106 units) and consolidation of Southgate project from 3Q2021 after increasing voting ratio from 50% to 65%. The decrease in the bottom line was mainly due to VND423bn of revaluation surplus from consolidating Izumi project (i.e. increasing ownership from 35.1% to 65.1%) recorded in 1Q2021. Gross margin jumped by 26 ppts YoY, to 42.6% mainly thanks to the consolidation of Southgate which mainly includes low-rise units. 

The results were equivalent to only 8% and 2% of the company’s revenue and PAT targets and lower than our estimation mainly due to a delay in recording ~VND350bn of profit from transferring 50% of Paragon Dai Phuoc and lower project deliveries than expectations.

Sales performance in 1Q2022 witnessed positive growth of over 50% YoY, to 579 units and VND2,774bn of contracted value. Of note, Akari project was the best seller with 430 units sold and over VND1,400bn of contracted value thanks to the launch of 500 units at Block AK7 and AK8 in March. Sales in April also had positive momentum with the launch of 300 

Flora Panorama units at Mizuki project with an absorption rate of over 80% and contracted value of ~VND900bn on launch day. If including bookings of over VND1,300bn for 190 units at Izumi project near the end of 2021 and sales from other projects, NLG sold 1,274 units with a total value of nearly VND5,900bn in 4M2022, completing 27% and 25% of 2022 targets, respectively. 

We maintain our 2022 forecast for NLG with net revenue of VND6,266bn (+21% YoY) and PATMI of VND1,237bn (+16% YoY) as we think project delivery will speed up and profit from transferring Paragon Dai Phuoc will be recorded in the coming quarters. We maintain our current target price for this stock at VND56,597 based on NAV method and upgrade our recommendation to BUY as stock price has corrected by 12% since our last update report in 2/2022.

View details in full report below.