Property stocks rise with NVL in leading position

The NovaWorld Phan Thiet entertainment and tourism complex covering 1,000ha in Binh Thuan

According to experienced investors, property stocks of companies mainly in the South have fared well since the beginning of this year. The companies, which have available land bank as well as high inventory of completed and unfinished projects, are benefiting from the rising demand and growing supply scarcity. The companies enjoy very favourable conditions in the midst of low interest rate and more cash flows going into securities.

More property companies in the South are developing self-contained urban complexes with clear segment targets. In particular, the companies with clean land fund, good price, and extensive experience are starting to make profits in this period. As a result, many property stocks like NVL (Novaland), NLG (Nam Long Group), KDH (Khang Dien House), AGG (An Gia Group), and IJC (Becamex IJC) are attracting investors.

Take NVL for example – for several years, little attention was paid to the ticker as the developer was in the beginning phase of developing large-scale projects. However, the company recently has announced its plan to accelerate the development process, which will increase its profits in the next three years. This has led to NVL’s rising share prices.

Closing the session on May 7, NVL share price was trading at VND135,800 ($5.90), a strong increase since the beginning of the year. It brings the market capitalisation of NVL to VND145.68 trillion ($6.33 billion), maintaining its position as the second-largest listed real estate company in Vietnam. Over the past years, the price of NVL shares fluctuated above the level of VND60,000 ($2.61).

NVL is one of the large-cap stocks with strong momentum in April. It became the stock that accounted for the ninth-largest proportion in the portfolio of Vietnam Enterprise Investment Limited (VEIL), with an investment value of about $82 million. Also, foreign investors net bought nearly VND1.4 trillion ($60.87 million) of NVL shares in 49 out of nearly 70 trading sessions during the first four months of the year.

On May 12, the Board of Directors also announced a plan to distribute bonus shares to shareholders at the ratio of 555:198. It is expected to issue nearly 386 million shares this time. This bonus share issuance plan has been planned and submitted by Novaland to shareholders for the past two years. With this bonus plan, it is expected that NVL's liquidity will increase sharply when its share has an "attractive" price range in the market. This is also the reason that many institutional and individual investors are weighing the opportunity to increase ownership of NVL because the room for price increase is very large.

In the first quarter of 2021, NVL’s sales grew by 152 per cent compared with last year’s period, bringing the total value of its delivered products to $5.3 billion. The group will accelerate the process of three key projects, including NovaWorld Ho Tram (Ba Ria-Vung Tau), NovaWorld Phan Thiet (Binh Thuan), and Aqua City (Dong Nai) to record its revenue in 2021-2023 to achieve its revenue targets, five years earlier than the original plan of 2028. It is projected that the total profit from three projects can reach $2 billion based on the charter capital of VND10.7 trillion ($465.22 million). The figure is much higher than the estimates in previous reports.

As of the first quarter of 2021, NVL’s land bank has risen to 5,400 hectares from 4,894ha at the end of 2020. The funds are located along the key national infrastructure projects with gross development value of $45 billion. NVL maintains its position as Vietnam’s second-largest land bank among listed property developers in the country.

The company aims to increase its land funds by another 10,000ha by 2030 in the south-central region such as Dong Nai, Binh Thuan, Ninh Thuan, Khanh Hoa, Phu Yen, and Binh Dinh. Rather than develop separate projects, NVL will develop complexes in the funds with infrastructure facilities and in line with local and regional economies.

Strong cash flows into NLG, KDH, and AGG

Along with NVL, other stocks like NLG, KDH, and AGG are offered at a good price and attracting cash flows in the market. KDH rallied 19 per cent in the past month with high liquidity over 6.4 million shares per trading session. NLG increased by 8 per cent in the past week with a volume of 4.1 million shares per trading session. Some securities firms predict it is possible to upsize about 24 per cent from the current price range. Meanwhile, AGG posted a slow but steady price increase, more than 29 per cent in the first quarter, and the rise is continuing to go to new heights.

There are strong grounds for the price increase among property firms based on their professional business activities and the potential of the land banks.

Specifically, in 2021, KDH continues its site clearance efforts and gradually complete legal procedures for existing projects in Thu Duc City (formerly districts 2 and 9), Binh Chanh and Binh Tan to prepare for development in the coming years.

In addition, the company plans to implement three projects, including a 4.3ha villa townhouse complex in Phu Huu ward and a 5.7ha villa townhouse project in Binh Trung Dong ward, Thu Duc city. Another development is an apartment project at 158 An Duong Vuong in Binh Tan district.

Regarding the business plan, KDH expects to generate VND4.8 trillion ($208.7 million) in revenue and VND1.2 trillion ($52.17 million) in after-tax profits, up 6 and 4 per cent, respectively, compared to 2020. The dividend is expected to be around 10 per cent.

NLG also make a breakthrough in the market this week thanks to its impressive business results in the first quarter of the year. In particular, the company's first-quarter profit mainly came from the revaluation from the increase in the ownership ratio at Dong Nai Waterfront City LLC at VND429 billion ($18.65 million). NLG acquired 30 per cent of the project from Keppel Land. In general, its after-tax profit reached VND365 billion ($15.87 million) in the first quarter, three times over the same period and fulfilling 32 per cent of the year’s target.

NLG also recorded nearly VND3.2 trillion ($139.13 million) including short-term prepayment of VND2.41 trillion ($104.78 million) and long-term unrealised revenue of VND767 billion ($33.35 million).

With the ownership increase to 65 per cent at Dong Nai Waterfront City LLC, NLG added to an additional 170ha to its land bank, which can accommodate approximately 7,000 products. Thanks to the advantage of prime location and urban area development trends in recent years, the securities company expects this will be a key project bringing large cash flow for NLG in 2021-2025.

Meanwhile, AGG currently owns more than 32.4ha of undeveloped land in the south of ​​Ho Chi Minh City, corresponding to about 15,000 products. In 2021, AGG plans to spend large capital to acquire a land bank of about 30-50ha in Binh Duong, corresponding to about 6,000 high-rise and low-rise products. Binh Duong is also one of the key markets of AGG, when the company is deploying The Standard Binh Duong with low-rise housing products. This project also marks AGG's vision to become a developer of complete urban areas in the next 3-5 years.

With a cautious development strategy, AGG is always looking for land funds that have completed legal procedures, thereby making it easy for AGG to find investment capital as well as quickly deploying project construction.

In 2021, AGG set a net revenue target of VND3.6 trillion ($156.5 million), double the previous year. Meanwhile, its after-tax profit will reach VND500 billion ($21.74 million), up 21 per cent. During the year, AGG will complete the sale, construction and handover of products of current trading projects Sky89 (Ho Chi Minh City) and The Wave (Vung Tau city). The company is launching new projects such as Westgate in Ho Chi Minh City, The Standard Binh Duong as wells another 3,500-unit project in Binh Duong.