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CRE – Strong outlook already priced in – Update

Company Note 01/04/2021    447

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  • FY21F is expected to be a breakthrough year for property investment business with three mega projects in CRE’s pipeline.\
  • We recommend HOLD with a target price of VND33,700 as market price is approaching fair value.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND31,750

VND33,700

3.1%

HOLD

REAL ESTATE

The strong investment pipeline is expected to drive earnings growth
Three new projects were added to CRE‘s secondary investment pipeline, including Louis City (Hoang Mai, Hanoi), Hinode Royal Park (Hoai Duc, Hanoi), and C-Sky View (Thu Dau Mot, Binh Duong). According to our estimates, the new projects have raised CRE’s secondary investment projects’ total investment to approximately VND7,100bn. Thus, we forecast secondary investment revenue will increase significantly by 122.9%/30.6% yoy to VND2,318bn /VND3,028bn in FY21-22F.

Well-equipped to expand its brokerage market share in the near term
Despite the lacklustre residential property market, CRE’s brokerage market share still increased to 14% at end-2020 from 12% at end-2019. CRE has actively expanded its network in neighboring provinces to ride on the vibrancy of these areas. In addition, CRE has worked with NVL and VHM to distribute their projects, likely boosting brokerage revenue to grow 39.9% in FY21F.

Increasing expenses on heavy investment in near term
CRE targets to develop its technology and expands its subsidiaries by 350% in 2021. In addition, the company plans to borrow about VND1,620bn of funding for new large-scale secondary investment projects in 2021F. Thus, we expect both SG&A expense and interest expense to peak in the short term, resulting in a 9.6%-10.0% pts drop in FY21-22F net margin, from 14-18% in FY18-20.

We forecast net profit will grow at an FY21-22F CAGR of 26.0%
In FY21F, we expect CRE’s revenue and net profit to jump by 80.9% yoy and 23.9% yoy, respectively, thanks to 1) a 39.9% yoy rise in brokerage revenue boosted by the strong rebound of the residential property market, and 2) a 122.8% yoy jump in secondary investment revenue, mainly from the contributions of three new projects. For FY22F, we forecast good momentum would remain and net profit will increase by 28.1% yoy to VND468.6bn.

HOLD rating with a target price of VND33,700
Our TP is based on an equal weighting of 1) FY21F P/E of 10x and 2) FY21F P/BV of 1.2x. Re-rating 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 real estate projects.

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