REE – Earnings bottoming out from Q2 2024
• REE announced weak Q2/2024 financial results with revenue flat at VND 2,183bn (USD 87mn) and NPAT-MI of VND 450bn (USD 18mn; -8% YoY). The underperformance of the energy segment, which contributes 40% of revenue and 80% of NPAT, outweighed strong performance of other segments such as mechanical and electrical (M&E) and real estate.• We believe REE’s earnings have already hit bottom in Q2/2024 and that would recover in Q3 and Q4 due to (1) a greater contribution from the real estate segment and (2) the company's hydroelectricity cycle, which peaks in Q3 and especially in Q4. We forecast full-year 2024F revenue of VND 8,509bn (USD 338mn; -1% YoY) and NPAT-MI of 2,021bn (USD 80mn; -8% YoY). Looking foward to 2025, we anticipate REE’s business to gradually recover, driven by (1) a recovery in hydroelectricity production due to the La Niña cycle and (2) a higher occupancy rate at the Etown 6 building.
• Using the sum-of-the-parts (SoTP) valuation method, we derive 12-month target price for REE at VND 71,300 per share, equivalent to a forward P/E of 16.5x and an expected return of 8% based on the closing price as of August 6, 2024.
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