SIP Update – BUY

SAIGON VRG INVESTMENT CORPORATION (SIP VN)

Reiterate our Buy rating with a target price of VND115,546 given well-located industrial parks, stable power and water distribution segment and healthy financial status despite weaker demand and global economic headwinds.

2Q23 result may go sideways

SIP posted 2022 net revenue of over VND6,000bn (+8% YoY) and PAT of VND977bn (+17% YoY), equivalent to 93% and 97% of our forecast, respectively. The slight underperformance was mainly due to a delay in industrial land area delivered at Phuoc Dong industrial park (IP) and lower warehouse/factory area leased at Dong Nam, Phuoc Dong and Le Minh Xuan 3 IPs than our projection. 

In 1Q23, SIP recorded net revenue of nearly VND1,400bn (-6% YoY) and PAT of VND166bn (-28% YoY) given a slowdown in register FDI to Vietnam (2022: USD27.7bn, -11% YoY) and 5M23: USD10.9bn, -7% YoY) driven by global economic headwinds and weaker demand. 

Tentative 2Q23 result may go sideways with net revenue of ~VND1,500bn (-7% YoY) and PAT of ~VND266bn (-1% YoY), according to the management in the recent AGM.

Healthy financial status

During the last five years, SIP maintained a very low debt balance and did not use long-term debts in 2019-2020. As of 31/3/2022, SIP had a debt balance of over VND1,000bn, mainly in short-term, and a cash & cash equivalent balance of over VND3,700bn, equivalent to nearly 1/5th of total assets, which is for clearance cost at Phuoc Dong IP – Phase 3 project. Net cash/Equity ratio was 70.5% as of 31/3/2022. In the AGM, the company increased 2022 cash dividend to VND4,500/share, stock dividend to 45% and stock bonus to 55%.

Stop lending to An Loc company at the end of 2Q23

SIP reduced its ownership in An Loc company from 99% to 18% recently and profit will be realized in 2Q23. As of 26/4/2023, a loan balance to The He Moi company reduced to zero and loans to An Loc company reduced to VND273bn. At the end of 2Q23, loans to An Loc company reduced to zero, according to the company management.