DXG reported strong Q2 2021 results with net revenue increasing 6.5x YoY to VND3.6tn (USD155mn) and strong NPAT-MI of VND298bn (USD13mn; vs a low base Q2 2020 with a VND556bn/USD24mn net loss because of the LDG divestment). For H1 2021, DXG’s net revenue surged 5.0x YoY to VND6.5tn (USD283mn) while its NPAT-MI reached VND830bn (USD36mn; vs a low base in H1 2020 of VND38bn/USD1.7mn). H1 2021 earnings were quite in line with the preliminary figure announced on July 16.

The robust H1 2021 results were mainly driven by a strong YoY result from the brokerage segment and handovers of pre-sold units at Opal Boulevard (total project includes ~1,500 mid-end condo units in Binh Duong) and Gem Sky World – GSW (total project includes ~4,000 low-rise/land plot units in Dong Nai). Management shared that the company handed over 770 units at GSW and 1,240 units at Opal Boulevard, contributing 22% and 48% of DXG’s H1 2021 revenue, respectively.

As H1 2021 NPAT-MI achieved 66% of our full-year forecast, we anticipate insignificant change to our 2021F NPAT-MI forecast of VND1.3tn (USD55mn; vs 2020’s low base with a VND496bn/USD22mn net loss) as stated in our last Update Report, DXG [OUTPERFORM +19.9%] - Handovers ramp up, brokerage services recover, dated May 10, 2021, pending for a fuller review.

GSW continued its strong pre-sales performance in Q2 2021. In Q2 2021, DXG’s total pre-sales value reached around VND1.8tn (USD78mn), which was mainly from ongoing sales of ~430 units at GSW. As a result, H1 2021 recorded total pre-sales value of VND2.8tn (USD122mn) and fulfilled 41% of our 2021F forecast of VND6.9tn (USD300mn; +5% YoY). This H1 2021 performance is in line with our forecast; therefore, we anticipate insignificant change to our pre-sales forecast for DXG as we continue to expect ongoing sales at GSW and expected launches at Opal Cityview (total project includes ~1,500 mid-end condo units in Binh Duong) and Lux Star (total project includes ~600 mid-end condo units in HCMC) to accelerate in H2 2021.

Balance sheet was highly deleveraged in Q2 2021 thanks to the successful DXS IPO and strong property handover results. We note that DXG’s net debt/equity ratio plummeted from 46% as of end-Q1 2021 to 10% as of end-Q2 2021, which is relatively low compared to DXG’s mid-cap peers. We attribute this encouraging deleveraging trend partly to the successful IPO of Dat Xanh Real Estate Services JSC – DXS (DXG currently owns 60%) and strong property handover results. We also note that DXG’s total cash and cash equivalents reached VND5.7tn (USD248mn) as of end-Q2 2021. In addition, management announced at DXG’s recent AGM that the company is continuing its plan of raising additional capital, including private issuance (at least USD174mn of proceeds) and international bonds (up to USD300mn of issuance amount) that we did not factor into our last Update Report. The current aggressive capital raising strategy should further boost the company’s medium-term outlook.