NLG – Presales bounce back in 2021F – Update

• NLG posted VND627bn in 4Q20 net profit (+14.4% yoy). Consequently, FY20 NP fell 13.1% yoy to VND835bn, in line at 94.9% our estimate.
• We estimate CAGR of 31.2% for earnings over FY20-23F on the back of strong handovers of three mega-projects.
• Reiterate Add with higher RNAV-based TP of VND38,000.

BCC projects were the key driver for 4Q20 NP growth

NLG’s 4Q20 revenue decreased 24.8% yoy to VND918.4bn, mostly from the construction services for business cooperation contract (BCC) projects namely Mizuki and Southgate (VND588.9bn). Nevertheless, 4Q20 net profit rose 14.4% yoy to VND626.8bn, driven by the capital transfer income from Waterfront project and 350-handover units from Southgate Phase 1.

FY20 net profit in line at 94.9% of our estimate

FY20 net profit fell by 13.1% yoy to VND834.9bn, making up 94.9% of our forecast at VND880bn. The VND726.7bn financial income (+651.1% yoy) and the surge in construction services revenue in BCC projects (+103.1% yoy) compensated for 1) a drop in FY20 property delivery revenue (-64.8% yoy); and 2) the absence of one-off land transfer revenue for its Paragon project in FY19 (VND383bn).

FY21F outlook: strong presales expected

FY20 presales were c.VND3,800bn (-35% yoy), mainly from on-going projects Southgate and Flora Akari, making up 68% of our forecast as the company delayed launching 760 condos in the next phase of Mizuki project to 2021F. We believe presales growth will stay strong in 2021F, driven by the launch of Mizuki project, Southgate Phase 2, Waterfront and VSIP Hai Phong which are located in the sought-after locations on the back of infrastructure improvement.

We estimate CAGR of 33.7% for earnings over FY20-23F

We forecast NLG’s FY21F net profit to jump 35.0% yoy, underpinned by delivery at Akari and Southgate. We expect a net profit CAGR of 33.7% in FY20-23F, driven by strong handovers of Southgate, Waterfront and VSIP Hai Phong projects.

Reiterate Add with higher TP of VND38,000

We reiterate our Add rating with a higher RNAV-based TP of VND38,000. We revise our TP up 9.2% from VND34,800 as we lower the discount to RNAV to reflect the recovery of residential market as well as a broad-based recovery of macro fundamentals in 2021F. Re-rating catalysts are higher-than-expected selling prices of the next phase of Mizuki, Akari and Southgate projects. Key downside risks to our call are regulatory delays and higher mortgage rates as these may dent NLG’s mid-range condo presales.

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