CRE – Better time ahead – Update

• CRE reported VND79bn (+42.6% yoy) in 3Q21 net profit (NP). For 9M21, NP jumped 74% yoy to VND329bn, forming 79.6% our full year forecast
• We revise up FY21-22F NP by 6.9%-38.8% to reflect strong secondary investment activities, aided by the success of recent capital raising.
• Upgrade from Hold to Add with a higher TP of VND36,100.

Robust 3Q21 results despite the pandemic
CRE posted VND843bn (+40% yoy) in 3Q21 revenue, on the back of VND571bn (+61% yoy) of secondary investment activities, which mainly came from two residential projects including Louis City and Hinode Royal Park in Hanoi, offsetting a contraction of 10.2% yoy (VND246bn) of brokerage business due to transaction volume plummeted 46% yoy to 1,339 units. In addition, 3Q21 gross profit margin (GPM) increased to 24.2% vs. 23.1% in 3Q20 mainly thanks to secondary investment GPM was very high at 21.9% in 3Q21 vs. only 4.1% in 3Q20. Thus, 3Q21 net profit grew 42.6% yoy to VND79bn. For 9M21, revenue jumped 246% yoy to VND4,426bn while NP increased 74% yoy to VND329bn, fulfilling 79.6% of our FY21 full-year forecast.
Successful capital raising to fuel for large-scale project investment
With the capital injection of VND960bn in Oct-2021 from issuance to existing shareholders, CRE will have ample room to accelerate the secondary investment next year, in our view. We expect FY22F secondary investment revenue will grow 89.4% yoy to VND7,955bn thanks to (1) total backlog of VND3.7tr from existing projects; and (2) CRE will acquire and re-distribute potential projects in the brokerage portfolio of VND60,000bn.
We raise FY21-22F net profit forecast by 6.9%-38.8%
We revise up FY21-22F brokerage revenue by 10.9%-13.5% to VND1,473bn-VND2,065bn thanks to a 9.3%-14.2% increase in average property value per unit assumptions. CRE is focusing on distributing low-rise products with high value. Meanwhile, the secondary investment revenue is expected to grow 303.9%-89.4% yoy to VND4,201bn-VND10,088bn, up 12.5%-81.8% compared to our previous forecast, respectively. Consequently, we expect NP to accelerate 50.2%-58.9% yoy in FY21-22F.
Upgrade from Hold to Add with a higher TP of VND36,100
We raise our TP to VND36,100 to reflect the FY22F EPS upgrade and roll forward our valuation base year to 2022. Our TP is based on an equal weighting of (1) a target P/E of 12.0x on FY22F EPS and (2) a target P/B of 1.9x on average FY22F BVPS. Upside catalyst is a larger-than-expected scale of the company’s secondary investment. Downside risks include a prolonged pandemic, which would impact brokerage activities and the launch of property projects

Please follow this link for the full report