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NVL – Well positioned for long term growth – Update

Company Note 12/04/2021    471

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  • Novaland Group JSC (NVL) owns more than 4,894 ha of land bank with prime location, which could sustain at least 10 years of development.
  • We expect deliveries from hospitality projects and Aqua City to fuel 51.4% net profit CAGR in FY20-23F.
  • Initiate coverage with a Hold rating and RNAV-based TP of VND100,500.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND9,400

VND13,500

7.4%

ADD

FINANCIALS

Sizeable prime land bank to secure pipeline for at least 10 years

Novaland (NVL) owns the second largest land bank among listed property developers in Vietnam, only behind Vinhomes. As of end-2020, NVL owns more than 4,894 ha of land bank, of which 1,394 ha is central and satellite urban real estates and 3,500 ha is resort properties, which could sustain at least 10 years of development, in our view. We estimate NVL’s projects under development have a gross development value (GDV) of VND446tr.

Improving presales in FY21F given recovery of the residential market
In FY20, NVL’s presales volume recorded 5,084 units (vs.6,367 units in FY19). In 2021F, we believe HCMC is still in short supply where the new launch is likely to be flat compared to 2020 while property market in neighbouring provinces will occupy centre stage in 2021F on the back of infrastructure improvement from public investment, in our view. Besides, low interest rate is also a supportive factor for the real estate market. As a result, we expect NVL’s FY21F presales volume to reach 5,755 units, increasing 13.2% yoy.

FY21-22F earnings growth to be driven by Aqua City and hospitality
We expect hospitality and satellite urban areas property delivery to be the most significant contributors to NVL’s top and bottom lines in FY21-22F as the bottleneck in residential projects in HCMC has not been removed. We estimate net profit to increase at a CAGR of 51.4% in FY20-23F. In FY21-22F, we expect the gross margin to sustain around 35-38%, backed mostly by the significant handover value from low-rise units at mega projects.

Initiate with Hold and RNAV-based TP of VND100,500
We initiate coverage of NVL with a Hold rating and RNAV-based TP of VND100,500 with an assumed WACC-based discount rate of 7.3% and RNAV discount rate of 15% for its developing portfolio due to the highest leverage among sector peers and legal complication of NVL’s projects. Re-rating catalysts is better-than-expected presales and solving regulatory problems. Downside risks including surge in mortgage rates and slow legal approval of construction permits.

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