BCG – Property remains the key pillar in FY22-23F – Update

• In 9T21, BCG’s net profit (NP) grew by 925.3% yoy, fulfilling 56.7% of our full year forecast.
• We raise our forecast for FY21/22/23F NP by 18.2%/185.8%/20.5% vs. previous projection due to the adjustment of property handover revenue.
• Recommend Hold with higher target price (TP) of VND27,800/share.

Robust 3Q21 net profit growth thanks to strong financial income
In 3Q21, BCG’s net revenue decreased by 41.5% yoy to VND457bn due to the contraction in service segment (-91.7% yoy) and construction segment (-88.7% yoy) given the social distancing during 4th wave of Covid-19. However, income from business cooperation contracts (BCC) and profit from investment helped financial income increased sharply by 482.0%. Thereby, 3Q21 NP jumped by 409.7% yoy to VND166bn, driving 9M21 NP up by 925.3% yoy, fulfilling 56.7% of our full year forecast.
Property remains as growth engine in FY22-23F
The Malibu Hoi An project handover will be delayed to FY22F due to the impact of the pandemic. In addition, we expect BCG will also hand over all 202 shophouses at Hoi An D’Or project along with part of Casa Premium, Casa Mui Ne, King Crown Infinity and the entire Amor Riverside Binh Chanh project in 2022, bringing revenue of VND5,406bn and net profit of VND1,205bn to BCG in the next year. In FY23F, we expect BCG will continue to hand over the rest of King Crown Infinity, Hoi An D’or, Casa Marina Mui Ne and Casa Premium projects. According to our forecast, BCG can record a revenue of VND2,977bn from the property development segment in FY23F.
Renewable energy segment will contribute c.17.6% of revenue in FY22F
In FY21, BCG has completed the installation of 114MW of the remaining capacity of Phu My project and is preparing to test and exploit it in the near future. In FY22F, BCG will focus on building 550MW of wind power projects with the goal of energising 80MW of Dong Thanh wind power phase 1 and 100MW of Khai Long wind power phase 1. We forecast that BCG’s power revenue will reach VND1,513bn (accounting for 17.6% of total revenue) in FY22F and VND3,721bn (accounting for 43.8%) in FY23F.
We recommend Hold with a higher TP of VND27,800/share
We recommend Hold with a SOTP-based TP of VND27,800. Re-rating catalysts are (1) higher-than-expected prices in hospitality property projects, (2) more favorable new FIT prices than expected after national PDP8. Downside risks including (1) the slow growth of the hospitality real estate market due to the pandemic, 2) the failure to complete the schedule to enjoy incentives for renewable energy projects, and 3) the risk of dilution due to huge capital needs.

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