Industrial real estate remains defiant in stock market

August 10, 2022 | 11:08
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Many businesses in the industrial property sector recorded strong business results in the first half of 2022, with rental demand and average rates in increasing industrial zones increasing.

Among the notable stocks is Kinh Bac Urban Development Corporation JSC (KBC). In the first six months, KBC achieved nearly $47 million in net revenues and $103 million in net profit, down 61 per cent in revenues but up 271 per cent in profit over the same period last year. This year, it set a business plan with total revenue of $426 million and profit after tax of $195 million.

Industrial real estate remains defiant in stock market
Industry analysts say the demand for industrial real estate will continue in a positive trajectory in 2023, Le Toan

KBC currently owns more than 4,700 hectares of industrial land and 917ha of urban area nationwide. Of which, the four zones of Que Vo Industrial Zone (IZ) and its expansion, Trang Due 1, and Trang Due 2 are fully occupied.

The company is now developing two new IZs, Nam Son Hap Linh and Trang Due 3. Both of these projects cover large areas and are located in key cities and provinces in terms of industrial property development.

Industrial Development and Investment Corporation JSC (BCM) is one of the largest capitalised and most profitable enterprises in the industry. BCM is funding and managing many IZs in the southern province of Binh Duong and other provinces with a total area of more than 15,000ha.

Among those, My Phuoc Industrial Park Complex (including My Phuoc 1-3, Thoi Hoa-My Phuoc 4, and Bau Bang-My Phuoc 5) is a typical example with a high occupancy rate.

The commercial land area of ​​up to 1,250ha in Binh Duong New City and Bau Bang and My Phuoc residential areas is expected to improve liquidity and profit margin to maintain a higher level of 43 per cent from 2022 after the new land price framework for rents in Binh Duong for the period 2020-2024 is applied.

Meanwhile, Vietnam-Singapore Industrial Park (VSIP) is a joint venture between Becamex IDC Corporation and Sembcorp Industries Group. To date, VSIP has developed a total of 10 projects across the country with a total land fund of more than 10,000ha including industrial, urban, and service land. In addition, the VSIP3 project with a total area of 1,000ha will also be the driving force for future growth.

An updated report on industrial property stock released by SSI at the end of July predicts that the second half of the year will see a growth rate of 47.3 per cent in after-tax revenue for the whole sector compared with the same period of last year. This growth rate is based on the expected resumption in demand for industrial real estate and the anticipated average rental increase from 8 to 20 per cent on-year.

“We assess that the demand for industrial land rentals will continue to grow positively in 2023 as the trend of shifting production from China to Vietnam continues and policies to attract foreign funding also promote a return to investing in Vietnam. These include preferential policies such as corporate income tax (CIT) exemptions for the first four years of operation, a reduction of 50 per cent CIT for the next five years, and many other incentives,” said Hoang Viet Phuong, director of the Investment Consultant and Analysis Centre under the SSI.

In addition to these, the improvement of infrastructure in the coming time such as the ring roads No.3 and No.4, Bien Hoa-Vung Tau, Dau Giay-Phan Thiet, and North-South expressways, the Cai Mep-Thi Vai port complex, and Gemalink Port will create more convenient connections between IZs.

“In 2023, the net profit of listed IZ developers is expected to grow by about 18 per cent due to the total area of ​​leased land growing by 10 per cent per year. Land rent is expected to increase by 8 per cent in southern Vietnam’s IZs and by 6 per cent in the northern IZs,” Phuong added.

According to SSI Research, the profit after tax of listed industrial real estate enterprises in the last six months of 2022 had a growth rate of more than 24 per cent, mainly coming from the recognition of land areas for investment.

In the second half of 2022 and into 2023, it is likely that industrial real estate will still gain investors’ interest, especially for stocks with attractive valuations. Some notable tickers are IDC, BCM, KBC, and VGC.

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