NVL – Back to buy territory – Update

• In FY21, NVL’s net profit (NP) rose by 196.5% yoy thanks to a surge of 284.3% yoy in property deliveries, fulfilling 78.9% of our full-year forecast.
• We increase the average selling price of Aqua City, NovaWorld Phan Thiet and NovaWorld Ho Tram projects by 27%, 10% and 7% respectively vs. previous projection to reflect the strong land price hikes in these area.
• Upgrade from Hold to Add with higher target price (TP) of VND89,000.

Contrast between top-line and bottom-line growth in FY21
In FY21, NVL’s net revenue increased by 196.5% yoy to VND14,903bn, fulfilling only 54.2% of NVL’s FY21 revenue guidance and 91.6% of our FY21 forecast thanks to strong property handovers of pre-sold units at NovaHills Mui Ne, NovaWorld Phan Thiet, NovaWorld Ho Tram, Aqua City and Saigon Royal. However, one-off gain from divesting in FY20 making a sharp decrease in financial income growth in FY21. Thereby, FY21 NP reduced by 17.6% yoy to VND3,230bn, fulfilling 78.9% of our full year forecast.
Huge unbilled revenue offers strong growth potential
Cumulatively in FY21, presales volume and value recorded 6,613 units (+30.1% yoy) and US$3,677m (~VND84.5tr, +100.8% yoy), respectively. We believe presales growth continues to do well in FY22F to reach VND93.5tr (+10.7% yoy) along with the recovery of hospitality property market on the back of vaccine penetration accelerates. Unbilled revenue at end-4Q21 reached US$7.8bn (+70% yoy), which can deliver high growth in FY22-24F.
Riding on the strong recovery of hospitality property market
According to DKRA, new supply for beach villas and condotel strongly bounced in FY21, more than 6.4 times higher than that in FY20, mostly from Ba Ria –Vung Tau, Phu Quoc, Binh Thuan, Dong Nai… with take-up rate of 58%-71% and the hike of 5%-10% yoy in land prices. Owning a large land bank of 10.600ha with more than 80% of hospitality property and suburban areas makes NVL a big beneficiary from hospitality real estate market recovery.
We recommend Add with a higher target price of VND89,000/share
We apply a DCF method to calculate the value of under-development projects and reassess future land bank portfolios in this update. Our new RNAV-based TP is VND89,000, which leads us to upgrade coverage on NVL from Hold to Add rating. This also reflects a positive outlook for NVL in FY22-23F. Re-rating catalysts are 1) better-than-expected presales, and 2) legal bottlenecks resolution. Downside risks to NVL stock are 1) long regulatory stumbling blocks, 2) more complicated pandemic in cities where NVL’s hospitality projects are located, and 3) dilution from convertible bonds
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