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KBC – Expect better performance in 4Q20F – Update

Company Note 12/11/2020    264


  • KBC’s 3Q20 net revenue fell 78.0% yoy to VND202bn due to a sharp decrease in industrial park (IP) leased land revenue.
  • We lower our FY20F EPS by 41.5% to reflect weaker-than-expected sales in 9M20.
  • Downgrade from Add to Hold with a lower TP of VND15,700.

Market price

Target price

Dividend yield



VND 14,000

VND 15,700



Property Devt & Invt

KBC’s 9M20 net profit hits 7-year low

Kinh Bac City Corp (KBC) reported a 9M20 net revenue of VND930bn (-63% yoy), due to a sharp decrease in IP leased land revenue (-76% yoy) to VND520bn as well as the absence of factory and warehouse sales. In 9M20, KBC leased 19ha of IP land (-82% yoy), mainly from Tan Phu Trung IP (16.8ha, -36% yoy) and Quang Chau IP (2.2ha, -97% yoy). Revenue from residential properties in 9M20 was VND122bn vs. a small contribution in 9M19 (VND1.7bn). Overall, weaker-than-expected 9M20 revenue dragged down net profit by 94% yoy to VND30bn, forming only 4.9% of our full-year forecast.

We expect strong earnings in 4Q20F

In Oct 20, the government approved the zoning adjustment at Nam Son Hap Linh IP. Thus, we expect NSHL Phase 1 (100ha) to be ready to handover land to registered investors in 4Q20F. In the best case, KBC can record VND1,379bn in revenue from NSHL IP (66ha in total NLA) in 4Q20F. Coupled with the delivery of shop houses and villas from Trang Due Urban Area in end-4Q20F, we expect the 4Q20F results to be strong.

Lower FY20F EPS to reflect weaker-than-expected sales

We reduce our FY20F revenue forecast by 35.5% to VND2,800bn (-12.8% yoy) due to the weaker-than-expected sales in 9M20. We project KBC to report a net profit of VND616bn in FY20F (-33.0% yoy), down 41.5% from our previous forecast, implying core EPS growth of -33.0% yoy. However, we raise our FY21F core EPS by 4.0% to reflect the strong rental growth in Tan Phu Trung IP in FY20-21F.

Downgrade from Add to Hold with a lower TP of VND15,700

We downgrade from Add to Hold and cut our RNAV-based TP to VND15,700 to reflect weaker-than-expected sales in 9M20 and delays in booking revenue from the Phuc Ninh project. Potential near-term upside risks could come from faster IP or residential land sales; our mid- to long-term investment thesis is dependent on whether KBC can clear legal hurdles for the start of Trang Cat project and receive approval for Trang Due 3 IP in FY21-22F. Key downside risks to our call: 1) worse-than-expected IP land sales; 2) delays in the delivery of NSHL Phase 1; and 3) delays in booking revenue from residential projects.

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