NLG – Solid outlook already priced in – Update

• NLG posted VND297bn in 3Q21 NP up 915.5% yoy. Consequently, 9M21 NP surged 241.0% yoy to VND709bn in line at 60.4% our estimate.
• We estimate CAGR of 29.2% for earnings over FY21-23F on the back of strong handovers of six projects and one-off income gains.
• Downgrade from Add to Hold with higher target price (TP) of VND61,200.

One-off gains to boosted 3Q21 bottom-line growth
NLG posted 3Q21 revenue down by 76.4% year-on-year (yoy) to VND150.9bn, as social distancing in Southern Vietnam restricted Akari City and Southgate handovers, leading a drop of 95.3% yoy in property handover revenue. NLG consolidated Southgate JSC and recognized a VND361bn revaluation surplus, thus 3Q21 net profit (NP) surged to 915.5% yoy to VND297.1bn. Consequently, 9M21 NP surged 241.0% yoy to VND709bn, driven by one-off gains at Southgate and Izumi City revaluations, in line at 60.4% of our estimate.
We slightly lower FY21F presales but stay positive on FY22F prospect
In 9M21, NLG sold 1,355 units from five projects, valued at VND5,078bn, lower-than-expected but significantly higher than the VND3,811bn achieved in FY20. We lower our FY21F presales by 24.7% to VND9,595bn (+151.8% yoy) in the context of complicated pandemic situation in the South since May 2021. We expect Paragon Dai Phuoc project to open for sales in FY22F, together with five on-going projects and residential market recovery, we project FY22F presales to surge 70.2% yoy to VND16,332bn.
Raise FY22-23F NP by 17.5%/8.5% upon aggressive handover schedule
Despite the lack of property handovers in FY21F, we make minor changes in our FY21F NP estimate as one-off gain from consolidating Southgate JSC is likely offset these amounts. We raise our FY22F NP forecast by 17.5% to VND1,695bn (+44.2% yoy), driven by 1) the reinstatement from its FY21F delayed handovers and 2) a VND600bn one-off income from share transfer at Paragon Dai Phuoc. We also raise FY23F NP estimate by 8.5% to VND1,962bn (+15.8% yoy) to reflect the contribution of Paragon Dai Phuoc following NLG’s new schedule.
Downgrade to Hold with a higher TP of VND61,200
We revise our TP for NLG up 31.0% to reflect housing price acceleration in HCMC’s neighboring provinces and NLG’s aggressive launch schedules. As recent share price rally has already factored the strong outlook, we downgrade our rating from Add to Hold. Re-rating catalysts are higher-than-expected selling prices of the next phases at NLG’s on-going 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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