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VRE – Darkest before dawn – Earnings Update

Company Note 03/11/2021    114

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  • In 3Q21, VRE posted VND787bn of revenue (-55.3% yoy; -47.8% qoq) and only VND24bn of net profit (-95.8% yoy, -93.7% qoq).
  • Vincom Retail’s 9M21 revenue and net profit decrease 10.9%/15.3% yoy, fulfilling 55% of our FY21F earnings forecast.
  • VRE is expected to launch a further support package of VND500bn and hand over about 90 shophouses in 4Q21 with a revenue of VND400bn.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND30,850

VND36,600

0.00%

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       REAL ESTATE

3Q21 results were hit hard by nationwide social distancing
• 3Q21 leasing revenue slid 54.7% yoy and 46.8% qoq to VND728bn as VRE released largest support package with the amount of VND925bn (compared to VND350bn in 2Q21 and VND145bn in 3Q20) mostly in the form of rent waive.
• Revenue from property delivery fell 81% yoy to VND20bn in 3Q21 as only 05 units were handed over in 3Q21 compared to 22 units in 3Q20.
• VRE’s gross margin dropped 31.4% pts to 16.6% as VRE’s leasing business were feezed during social distancing in 3Q21. Thus, 3Q21 gross profit dropped 84.6% yoy to VND130bn.
• SG&A expenses decreased 32% yoy as VRE cuts operating costs of shopping centers during social distancing period.
• Consequently, VRE posted VND787bn of 3Q21 revenue (-55.3% yoy; -47.8% qoq) and only VND24bn of net profit (-95.8% yoy, -93.7% qoq).
• For 9M21, VRE’s revenue and net profit dropped 10.9%/15.3% yoy to VND4,524bn/VND1,193bn, forming 55% of our FY21F forecast.

Key takeaway from analyst meeting on 29 Oct
• The company is targeting to launch a further support package of VND500bn in 4Q21 for tenants as some entertainment businesses (cinema, indoor playground, …) have not been allowed to open yet.
• The company aims to hand over about 90 shophouses in 4Q21 with expected revenue of about VND400bn.
• The 68,000 sqm Vincom Megamall Smart City will fully open in early 2022 and we expect it will reach over 85% occupancy rate. So far some necessary business tenants are allowed to open in this mega mall since 4Q2021.

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