NLG positive 2Q2022 business result

Nam Long (HSX: NLG) announced positive 2Q2022 result with a 3 times YoY increase in revenue to VND1,241bn and a four times YoY increase in PAT to VND192bn, which was in line with our forecast. For 1H2022, the company recorded over VND1,800bn in revenue (+187% YoY) and VND225bn in PAT (-45% YoY), completing 26% and 15% of targets, respectively. The increase in the top line was thanks to more units delivered mainly at Valora Southgate (over 200 units) and Flora Akari (189 units) while the decrease in the bottom line was due to VND423bn of revaluation surplus from consolidation Izumi project recorded in 1Q2021.

Presales in 1H2022 reached over VND8.4trn (+87% YoY), equivalent to 36% of NLG’s whole-year target, of which Mizuki Park was the main contributor with over VND2.8trn, followed by Akari City and Izumi City with presales of nearly VND2trn each. In 2H20222, NLG will launch 3,340 units equivalent to pre-sales value of nearly VND16trn to complete the target.

The company had healthy financial status despite tightening credit to the real estate sector and corporate bonds inspection. As of 30/6/2022, NLG had Net debt/Equity of 3.9% and debt balance of VND4,441bn. We think NLG may have no trouble in debt payment in 2022 given good presales of over VND8.4trn  in 1H2022, cash & cash equivalent balance of nearly VND4trn and expected proceed of VND1.3trn from transferring 50% stake in Paragon project with estimated net profit of VND350bn.

NLG’s capital raising activities were relatively normal during this challenging period. In 4/2022, the company successfully issued VND1trn bond to International Finance Corporation (IFC) with a fixed interest rate of 9.35%/year for 7 years to be used for the second phase of Waterpoint project in Long An.

Comment: 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 will be recorded in 2H2022. We maintain our BUY rating with a target price of VND56,597. Please see our report HERE from May 6th, 2022 for further details on our recommendation.