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KBC – Most of the positives have been priced in

Company Note 15/01/2021    209

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  • We believe KBC would take advantage of the “China plus one” strategy and acceleration of FDI into Vietnam in 2021F, leveraging its sizable land bank.
  • Its property development projects in the Trang Cat and Phuc Ninh urban areas should also provide strong support for its long-term earnings growth.
  • Reiterate our Hold call with a higher TP of VND29,600.

Market price

Target price

Dividend yield

Recommendation

Sector

VND 33,350

VND 29,600

0%

Hold

Property Devt & Invt

“China plus one” strategy opens up great opportunities for KBC

At end-4Q20, Foxconn, which had factories in KBC’s Que Vo IP in Bac Giang province since 2007 announced it will move the manufacturing of some Apple iPads and MacBooks from China to Vietnam’s northeastern Bac Giang province with US$270m investment. This could help attract many of Apple’s vendors/sub-contractors to invest in Vietnam. KBC’s Quang Chau IP stands to benefit, given its strategic location 2km from Que Vo IP, adjacent to Bac Ninh province and on the traffic axis of many large production areas.

KBC holds the leading position in attracting FDI

We believe KBC is in a good position to benefit the most from the acceleration of FDI into Vietnam in 2021F. It has been one of the nation’s most successful private corporations in attracting FDIs; >90% of its Industrial Park (IP) customers are foreign enterprises from Japan, Taiwan, Korea, China, Hong Kong, etc. In 4Q20, KBC leased out 150ha of IP space valued at US$150m, mainly to companies in hi-tech and electronic technology sectors.

KBC’s residential property business awakens

The authorities on 18 Dec 2020 gave KBC the approval to continue its property development in the Trang Cat urban area; KBC shall have to pay temporary land use levy of VND1,000bn. We expect KBC to complete the payment and clear all legal hurdles to start its project in Trang Cat. In addition, at end-2020, Bac Ninh city People’s Committee granted KBC an investment certificate for its residential project in Phuc Ninh urban area. These projects could provide strong support for KBC’s long-term earnings growth, in our view.

EPS growth expected to bounce back strongly in FY21-22F

We raise our FY21F EPS forecast by 9.4% to reflect higher-than-expected IP rental growth. We project net profit of VND1,412bn for FY22F (+55.2 yoy), up 64.7% from our previous forecast, implying core EPS growth of 55.2% yoy as we believe more villas/townhouses from Phuc Ninh project will be delivered in FY22F as it overcomes some bottleneck issues.

Reiterate Hold with a higher TP of VND29,600

We reiterate our Hold rating with a higher RNAV-based TP to VND29,600. Potential upside risks are dependent on whether KBC can clear legal hurdles for the start of its Trang Cat project and receive approval for Trang Due 3 IP. 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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