NLG – Ripe for the picking – Update

• NLG posted VND365.3bn in 1Q21 net profit up 230.8% year-on-year (yoy), driven by a one-off income of VND429bn at Waterfront.
• We remain upbeat on NLG’s FY21F presales prospect, with a total presales value rising 234.5% yoy to VND12,746bn.
• Reiterate Add with higher revalued net asset value (RNAV)-based target price (TP) of VND46,700

1Q21 witnessed a contrast between top-line and bottom-line growth
NLG reported 1Q21 revenue down 43.4% yoy to VND235.8bn, due to a drop of 64.9% yoy in property handover revenue. Mostly NLG’s key projects are under construction, of which Akari (c.1,200 units of condo) will be handed over from 2H21F. Nevertheless, 1Q21 net profit (NP) surged to 230.8% yoy to VND365.3bn, driven by a one-off income of VND429bn from revaluation at the Waterfront project, making up 30.3% of our full-year forecast.

FY21F outlook: presales strongly bounced
NLG sold 968 residential units in 4M21, valued at VND4,100bn, which is significantly higher than the VND3,811bn achieved in the whole FY20, thanks to the successful launches of Mizuki and Southgate. NLG plans to launch six potential projects in FY21F, thus we remain upbeat on its FY21F presales prospect, with a total presales value rising 234.5% yoy to VND12,746bn. We raise our FY21F NP forecast by 6.8% to VND1,204bn (+44.2% yoy) to reflect higher-than-expected one-off income from the Waterfront project. NLG targets a payment of 15% dividend in cash for 2021.

We estimate CAGR of 22.6% for earnings over FY21-23F
We expect a 44.8% of revenue compounded annual growth rate (CAGR) and 22.6% of net profit CAGR in FY21-23F, mostly driven by strong handovers of Southgate, Waterfront, Akari, Mizuki, and VSIP Hai Phong projects.

Reiterate Add with a higher TP of VND46,700
We revise our TP for NLG up 22.9% as we 1) update our discounted cash flow (DCF)-based valuation for Can Tho 43ha project to factor its commence in end-FY21F and 2) increase average selling price assumption by 10% to VND38m psm at Mizuki project due to housing price acceleration in Binh Chanh district. Re-rating catalysts are higher-than-expected selling prices of Izumi City and Can Tho 43ha projects. Key downside risks 1) regulatory delays, 2) higher mortgage rates as these may dent NLG’s mid-range condo presales, and 3) continuous upward trend in construction material prices.

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