VRE – Stay tuned for a bounce-back in 4Q20F – Earnings Flash

• Vincom Retail (VRE) reported a 3Q20 revenue of VND1,760bn (-20.3% yoy) and net profit of VND572bn (-20.1% yoy).
• 9M20 revenue fell 21.6% yoy to VND5,076bn and net profit was down 28.5% yoy to VND1,407bn, forming 59% of our full-year forecast.
• Reiterate Add with an unchanged DCF-based TP of VND38,000.

3Q20 results: recovery on track

• VRE recorded a 3Q20 revenue of VND1,760bn (-20.3% yoy; +8.0% qoq) and a 3Q20 net profit of VND572bn (-20.1% yoy, +66.8% qoq)
• Leasing revenue slid 11% on a yoy basis but surged 23% on a qoq basis to VND1,607bn. We estimate that average rental price dropped 9% yoy, but improved 23% qoq, as VRE scaled down the value of its supporting package for tenants to VND145bn in 3Q20, from VND675bn in 1H20.
• VRE’s total GFA stood at 1.6m sqm in 3Q20, unchanged from end-FY19, as no new malls had been launched since the beginning of 2020. 3Q20 occupancy rate stayed encouragingly at 84%, -7.9% pts yoy mostly due to the closure of Vinpro at end-19, but largely unchanged qoq.
• Revenue from property delivery fell 69% yoy to VND107bn in 3Q20. We expect VRE to book a revenue of VND1,627bn in 4Q20F.
• Net financial expense jumped 204% yoy in 3Q20, as unconvertible bonds rose 113% yoy from VND2,600bn in 3Q19 to VND5,500bn in 3Q20.
• For 9M20, VRE’s revenue fell 21.6% yoy to VND5,076bn and net profit declined by 28.5% yoy to VND1,407bn, forming 59% of our FY20F forecast.

Expect VND1,627bn to be booked from property delivery in 4Q20F

• We expect revenue from properties to grow 107% yoy to VND1,627bn in 4Q20F, mainly stemming from shop house delivery in My Tho, Bac Lieu, Cam Pha, Cao Lanh, Sa Dec and Kon Tum.
• We expected a retail mobility bounce-back to pre-Covid-19 levels to lift both 4Q20F average rental price and occupancy ratio above 9M20’s levels. VRE aims to launch Vincom Mega Mall Ocean Park (Hanoi) in Dec 20, which will add 56k sqm to total GFA (+3.5% yoy). We expect 4Q20F leasing revenue to rise 12.7% yoy to VND2,200bn.
• Overall, we expect 4Q20F revenue of VND4,013bn (+44.1% yoy) and net profit of VND997bn (+13.1% yoy), bringing FY20F NP to VND2,405bn(-15.6% yoy).

Reiterate Add with DCF-based TP of VND38,000

• We reiterate our Add rating with a VND38,000 TP (WACC: 12.6%). Potential catalysts: 1) faster-than-expected mall openings, and 2) faster-than-expected recovery in retail sales, lead to a strong growth in leasing business. Downside risk: another wave of Covid-19 outbreak, leading to further mall closures and rental support packages.

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