SZC – Set for another good year – Initiation

• Locating in industrial park (IP) hotspot, Ba Ria-Vung Tau, SZC stands out with large land bank of 2,287ha and competitive rental prices.
• We expect a 49.8% net profit CAGR over FY21-23F, driven by a rise in revenue from the industrial property and residential projects.
• Initiate coverage with an Add rating and SOTP-based TP of VND58,800.

Owning the second-largest land bank among listed industrial property companies

SZC is well-positioned to capture the growing demand for industrial property in the South, triggered by the manufacturing inflow to Vietnam on the “China plus one” strategy thanks to: 1) strong support from its parent company, Sonadezi Corporation; 2) the second-largest available land bank (660ha) and competitive rental prices among listed peers in Vietnam; and 3) attracting a diversified manufacturer profile on favorable location near ports, airport and other IPs in Ba Ria – Vung Tau (BR-VT).

Ba Ria – Vung Tau (BR-VT) is an industrial park hotspot

BR-VT emerges as one of the major industrial hubs in Southern Vietnam, thanks to its proximity to HCMC, competitive land prices and large leasable area. Together with Cai Mep -Thi Vai port cluster, upcoming Long Thanh International airport and key traffic infrastructure, BR-VT is an ideal destination for all manufacturing sectors ranging from heavy industries to chemicals and automobile to supporting industries. We believe the province is one of the biggest beneficiaries to ride on the strong capital inflow and increasing rental prices.

We believe FY22F is another stellar year for SZC

We forecast average rental rates to grow at CAGR of 17.5% in FY21-22F to US$65-80 psm per lease term, bringing industrial property revenue to surge 56.6%/29% yoy in FY21 and FY22F, respectively. Together with the contribution of Chau Duc urban and golf course projects from FY21F, would generate a revenue CAGR of 52.0% and a net profit CAGR of 49.8% over FY21-23F.

Initiate with Add and SOTP-based TP of VND58,800

We initiate coverage of SZC with Add rating and SOTP-based TP of VND58,800 with an assumed WACC-based discount rate of 9.7%. Upside catalysts are 1) a better-than-expected IP and residential land sales, 2) faster land clearance, which will speed up project implementation. Downside risks are 1) prolong 4th COVID-19 outbreak which could restrict sales and investment activities, and 2) delays in residential and golf course launches.

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