IDC – Analyst Tour 2022 note

Idico (HNX: IDC) was ranked #3 in terms of market-cap in the industrial property segment after Becamex (HSX: BCM) and Kinh Bac (HSX: KBC) with four business lines: industrial property, power, residential property, and industrial park related services. The company set CAGR targets of 22.9% for revenue and 20.9% for PBT in 2022-2026 with main contribution from industrial property and power segments. In addition, IDC aims to reach ROE of 40% and EPS of VND14,100 in 2026F and average dividend payment of 40% in 2022-2026. According to the management, IDC has completed ~60% of PBT target of VND2,800bn in 1H2022. Of note, 2Q2022 result included the final settlement recorded for Nhon Trach 5 Industrial park (IP). Accordingly, IDC recognized all unrealized unearned revenue of Nhon Trach 5 IP as revenue by increasing the opening balance of retained earnings, similar to the recognition of My Xuan A IP in 2021.

INDUSTRIAL PROPERTY: IDC currently has 5 fully-occupied IPs and 5 ongoing IPs with a total industrial land area of 3,267ha, of which NLA available for lease as of 6/2022 was 755ha as shown in the table below. These IPs have been attracted over 250 projects with a total investment capital of over USD8bn. IDC leased over 90ha in 1H2022, completing 56% of its leasing target, of which Huu Thanh IP accounted for 73.4 ha, mainly from 2 logistics tenants. 

IDC is expanding its land bank (i.e. 5 projects in the north with a total area of 1,000-1,200ha; 2-4 projects in the south with a total area of 1,000ha and My Xuan A expansion of 110-500ha in Ba Ria – Vung Tau), of which around 1,400ha is expected to be approved in 2023-2024. Of note, Tan Phuoc 1 IP in Tien Giang has been approved by 12/2021 with a total area of 470ha and charter capital of VND900bn which IDC accounted for 65%. Around 170ha of this IP has not been cleared and is agriculture land for short growing season, thus the clearance cost and process may not be challenging.

IDC will gradually change its IP leasing revenue booking method from annually to one-off, thus the unearned revenue of VND5.9trn will be gradually recorded in 2021-2026 with expected gross profit of nearly ~VND3trn. All ongoing IPs are expected to bring VND30trn of total revenues with an average gross margin of 60%, of which the remaining revenue has not been leased as of 6/2022 of VND21.2trn is expected to be realized in 2022-2026.

Comment: Overall, we think IDC is a very competitive player in the industrial property and power distribution segments given its well-located IPs, low clearance cost for IPs and distinct license to distribute power directly to clients. We appreciate IDC’s strategic plan to focus on the industrial property segment given its positive outlook thanks to Vietnam’s high working aged population, China+1 trend, stable political environment, etc. The increasing demand to use power from tenants is a key growth driver for the power sector as more and more international corporations choose Vietnam as a potential destination for their factory expansion and relocation. We will soon release out initiation report for this company after it announcement of the second quarter result.

View details in full report below.