INDUSTRIAL REALTY STOCKS REMAIN ATTRACTIVE IN SECOND HALF OF 2022

The shift of global investment to Vietnam is creating a bright spot for the industrial park real estate market.
A recent report by SSI Research expected that the industry's profit after tax will grow by 47.3 per cent compared to the same period last year thanks to industrial land demand which is forecast to recover positively after the economy reopened post-pandemic.

These positive signals also open up many expectations for industrial real estate stocks in the second half of 2022.

Speaking on a talkshow organised by Vietnam Investment Review newspaper, Ngo Thi Kim Thanh, senior Investment strategy specialist at the Center for Analysis and Investment Consulting of SSI Securities, believes that in the first period of 2022, cash flow into the stock market witnessed a strong divergence and a circulation between industry groups.

Recently the group of industrial real estate stocks recovered quite strongly, boosted by positive growth in demand for rental in industrial real estate when FDI flows tend to return to Viet Nam after two years of being interrupted by COVID-19 and causing rent prices in industrial parks to rise.

Although industrial real estate stocks have sharply rebounded, it is no longer as easy as in the previous period to choose the right stocks for investment due to different business results among companies.

However, SSI experts said that there are still attractive valuation stocks that investors may be interested in, which are those with large land banks available for lease and large cleared lands.

A forecast report of SSI Research showed that profit after tax of listed companies in the last six months of 2022 will grow by more than 24 per cent, mainly thanks to the strong increase in the rental land area during the period.

In addition, some industrial zones changed from regular recording to one-time recording, leading to a sharp gain in profits.

In 2023, SSI Research expected that the net profit of listed industrial park developers grows by about 18 per cent year-on-year due to many factors. The first is that the total area of ​​land for lease rise by 10 per cent per year. Second, land rents are expected to pick up 8 per cent in the south Viet Nam and 6 per cent in the north in 2023.

Of which, Kinh Bac City Development Holding Corporation (HoSE: KBC)’s profit after tax is estimated at VND3.7 trillion (nearly US$158.4 million), up 25 per cent on year, as current projects continue to be the main source of revenue. Moreover, phase 3 of Trang Due Industrial Park project and other industrial zones in Long An Province can start to generate income.

Meanwhile, IDICO Corporatio (HNX: IDC)’s net profit is expected to edged up 24 per cent year-on-year to VND2.2 trillion, mainly thanks to profits from the expanded Huu Thanh and Phu My Industrial Parks, and the divestment in subsidiary companies.

SSI experts also noted that revenue on the financial statements of enterprises has long-term unrealised revenue.

For some industrial park developers, the value is very large such as IDC has VND5.9 billion in unrealised revenue. The reason is that in the past, revenues from leasing of industrial parks were recorded in the long-term unrealised revenue section and will be distributed over the remaining time of the industrial park.

For a large long-term unrealised revenue, if the investor does not have a land fund for lease, as well as a new project, this is a rather large source of money and will be used to pay cash dividends. This is also an investment trend to minimise risks when the market fluctuates, especially for investors who prefer a high dividend policy.

Source: VIR