DXS reported Q2 2021 results with net revenue increasing 120% YoY to VND1.1tn (USD47mn) and strong NPAT-MI of VND197bn (USD8.6mn; +89% YoY). For H1 2021, DXS’s net revenue increased 125% YoY to VND2.1tn (USD92.5mn) while its NPAT-MI reached VND399bn (USD17.3mn; +72% YoY). Although H1 2021 NPAT-MI achieved 30% of our full-year forecast, we anticipate insignificant change to our 2021F NPAT-MI forecast of VND1.3tn (USD58.2mn; +53% YoY) as stated in our Initiation Report, DXS [BUY +38.4%] - Pure play on growing residential brokerage market, dated July 6, 2021, pending for a fuller review. We continue to expect earnings to accelerate in H2 2021 along with the quick recovery of brokerage activities after social distancing measures in Vietnam subside. We also note that H2 2020 NPAT-MI accounted for 73% of the 2020 NPAT-MI result of VND873bn (USD38mn).

Northern market led revenue contribution. Per management, the northern market contributed ~50% of DXS’s H1 2021 revenue with key brokerage projects including Lotus Sai Dong (mid-end condo project in Hanoi), Phuong Dong Green Park (mid-end condo project in Hanoi), Palm City Hai Duong (low-rise residence in Hai Duong) and Uong Bi New city (land plots in Quang Ninh). The southern made a ~35% contribution to DXS’s H1 2021 revenue with key projects including Gem Sky World (DXG’s 92-ha low-rise residence project in Dong Nai), Eco Xuan (mid-end condo project in Binh Duong) and Stella Mega City (low-rise residence project in Can Tho). The central market continued to record low results vs the 2018-2019 period and it only made a ~15% contribution to DXS’s H1 2021 revenue. Management also shared that brokerage revenue for distributing DXG’s projects reached 11% of DXS’s H1 2021 revenue.

Gross margin declined YoY in H1 2021 due to a higher mix of traditional brokerage. DXS recorded H1 2021 GPM of 66% vs 75% in H1 2020 while maintaining its NPAT margin at 31%. Per management, H1 2021 recorded a high contribution from northern market with Northern Dat Xanh (DXS owns 63.5%) completing a larger mix of traditional brokerage. As such, the higher proportion of traditional brokerage resulted in a YoY decline of H1 2021 gross margin.