VRE update – BUY

Upgrade 2022 forecasts and our target price to VND36,668 given lower expected supporting package to tenants, higher 2022 property presales and lower net debt balance. Change rating from Hold to Buy as stock price has adjusted by 12% since our update report in 3/2022.

VRE announced a positive 2Q2022 result with net revenue of VND1,850bn (+23% YoY) and PAT of VND773bn (+100% YoY), which was in line with our forecast. This result was mainly thanks to a 33% YoY growth of leasing revenue, to VND1,822bn driven by: (1) minimal supporting package when tenants returned to relatively normal businesses compared with VND424bn spent in 2Q2021 and (2) openings of VMM Smart City, VCP My Tho and VCP Bac Lieu with total retail GFA of ~93,000 sqm in 2Q2022. 

On the other hand, property sales dropped by 91% YoY, to VND8bn due to lower units delivered (2 units vs 16 units). However, presales recorded deposits for 218 units in 2 new projects, leading to unbilled bookings of VND2,900bn at the end of 2Q2022 which will drive property sales to increase in 2023.

For 1H2022, VRE recorded stable result compared with 1H2021 with net revenue of VND3,219bn (-14% YoY) and PAT of VND1,151bn (-2% YoY), completing 40% and 48% of targets, respectively.

Overall, we believe VRE will strongly recover in 2022 given its internal strength (i.e. dominant market share, healthy financial status and support from the Vingroup ecosystem) and external growth drivers (e.g. recovering local retail market and continuous expansion of international brands in Vietnam). We upgrade our target price by 8% to VND36,668 and change rating from Hold to Buy as the stock price has adjusted by 12% since our update report in 3/2022. Our main concerns for this stock are: (1) delays in developing Vinhomes’ mega projects may affect VRE’s expansion plan, (2) disruption of supply chains given China’s zero-COVID policy may affect tenants’ new stores’ opennings and (3) inflation concerns may affect shoppers’ consumption of non-essential goods.

View details in full report below.