VRE - Pivotal year for the development of Vincom Megamalls
Vincom Retail targets to open 13 new malls in 2019, adding 153,000 sqm of GFA, of which Vincom Center Tran Duy Hung launching in late-April is the key project. In addition, three new Vincom Megamalls as components of Vinhomes’ mega residential complexes are under construction, and expected to be put into operation in 2020-2021.
We estimate revenue and net profit in 2Q 2019 will be VND 2,136 billion and VND 685 billion respectively. Vincom Center Tran Duy Hung will contribute to total leasing revenue. FY2019 revenue and net profit are estimated at VND 9,276 billion (+1.7% YoY) and 2,927 billion (+21.7% YoY) respectively.
Rong Viet Securities remains positive on VRE’s core business given its (1) dominance in Vietnam’s retail leasing industry and (2) ample room for growth in coming years. Vincom Retail is on the right track and increasingly welcoming retailers who can bring fresh elements to their properties while at the same time reshuffling tenants to enhance mall positioning and optimize rental yield. Vincom Retail stands out among its rivals thanks to: 1) its 60% market share in retail leasing, leading to great opportunities to co-operate with prominent retailers and 2) scalability as part of the Vinhomes’ residential complexes and Vingroup’s ability to acquire new land bank in tier-2 and 3 provinces and cities.
The company is trading at 2019 forward P/E and P/B of 29.1x and 2.7x respectively. Using a capitalization rate and multiple valuation method, we come up with a fair value of VND 39,600 per share, equivalent to an expected return of 8% compared to the closing price on May 15th 2019. Therefore, we recommend to ACCUMULATE the stock.
Viet Dragon Securities belongs to top 20 biggest securities companies in terms of chartered capital in Vietnam. With a qualified, dedicated and professional team, a widespread network, advanced technology, diversified products and services, and good relationship with local and foreign institutions, we provide a wide range of services and products to our clients both individuals and institutions, both local and foreign. We commit to provide our clients with promising investment opportunities and a comprehensive and professional financial investment services.
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