VRE update – HOLD

VINCOM RETAIL JSC (VRE VN)

Adjust 2022 target price to VND34,052 given the planned support package and delay in new mall openings. Change rating from Buy to Hold as the stock price has increased.

2021 Business result

In 2021, VRE recorded total revenue of VND5,891bn (-29% YoY) and PAT of VND1,315bn (-45% YoY), lower than our expectation because:

1. Support package given to tenants who were heavily impacted by COVID-19 was higher than expected. Without this package, VRE’s revenue would have reached VND8trn.

2. Part of VMM Smart City was not opened in 4Q2021 as VRE’s previous plan. 

3. Property sales were lower than expected.

Leasing revenue dropped by 22% YoY, to VND4,701bn mainly due to support package of VND2,115bn compared with VND865bn in 2020. Leasing NOI followed the same trend with a 26% YoY decrease to VND3,161bn. As some small tenants left due to financial difficulties, the average occupancy rate in 2021 dropped by 1.4 ppts, to 84%, of which Vincom Plaza saw the highest decrease of 2.7 ppts, to 80% among four retail formats while Vincom Center saw an improvement of 2.0 ppts, to 94% thanks to upgrading tenant mix at VCC Dong Khoi, VCC Lieu Giai and VCC Pham Ngoc Thach. Tenants with strong balance sheet still expanded such as the opening of Muji in Vincom Metropolis and Decathlon in VMM Thao Dien (Please see Appendix 1 for details). 

Property sales also declined by 53% YoY, to over VND1,000bn given 235 units were delivered compared with 346 units in 2020. 

The 2021 results were heavily impacted by the 3Q2021 results, but the 4Q2021 saw strong recovery. 4Q2021 revenue and profit increased by 74% and 402% QoQ respectively thanks to Government’s efforts to reopen the economy and increase in shophouses delivery. All 80 malls have returned to normal operation except for tenants at malls located in high infection risk areas. Footfall to Vincom malls in December 2021 reached 8.1 million visitors, 4 times the level in August 2021