KBC - Awaiting for a breakthrough year
Kinh Bac Development Holding Corporation (HOSE: KBC) is one of the leading industrial park developers. The company possesses a huge land bank including 5,174 ha for industrial land and more than 1,100 ha for urban area development. It owns 7 major IPs in Bac Ninh, Hai Phong and HCMC as well as 7 IPs in associated with other parties. In the short term, land lots and villas sales are expected to bolster the company’s result. In the long term, the incoming leasable land of 689 ha from Nam Son Hap Linh and Trang Due 3 will ensure lease room for KBC. Since most tenants in KBC’s industrial zones are foreign investors, the company may face difficulties if FDI inflows slow down. In addition, delay in construction due to long-lasting compensation phase and implicit risks in paper application as well as regulatory change.
Since 90% of tenants in KBC’s zones are foreign investors, the company has been facing such difficulties when foreign capital flows are scanty. We are a little afraid that strictly selective criteria for tenants will somehow affect the company’s performance since it probably limits investors to set footprint to the zones. However, we also see this as a necessary step to achieve sustainable growth and in comply with the Government’s guidance.
Considering the above issues, we believe KBC is fairly priced at VND16,270/share by using a DCF valuation method. Incorporating an expected 10% cash dividend, we therefore come up with a “BUY” recommendation, implying a total stock return of 26.5%
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