- 2024-07-31T00:00:00
- Company Research
On July 30, NVL conducted a session to provide updates on the company’s restructuring and project development progress. We attended the meeting and our key takeaways are as follows:
- Update on debt restructuring and legal status of key projects: Since end-2022, NVL has been engaged in debt restructuring via negotiations for maturity extensions, asset swaps, or collateral liquidation. According to management, NVL’s total debt balance is down 1.4% YTD and down 13% vs end-2022 (see Figure 1). Additionally, management expects that in H2 2024G there will be further progress in resolving the current legal obstacles for key projects Aqua City, Novaworld Phan Thiet, and Novaworld Ho Tram (see Figure 2).
- Cash collection progress: As of end-Q2 2024, NVL collected a total VND132tn (USD5.2bn), with Aqua City accounting for 48%, Novaworld Phan Thiet 28%, Novaworld Ho Tram 11% and other HCMC projects 12% (see Figure 3). Per management, the remaining cash to collect (based on total presold units) is around VND100tn (USD3.9bn).
- Company’s focus: Management stated that in H2 2024 and 2025, NVL will prioritize (1) working with the Government and provincial authorities to resolve legal constraints at projects and resume construction, in turn improving the confidence of homebuyers at NVL’s projects, (2) delivering presold property units to secure cash presales from homebuyers, and (3) debt restructuring and new capital raising. Management foresees a significant recovery in the residential market by H1 2026, which will create a more favorable environment for NVL to resume new presales plans.
Our view: We believe NVL’s fundamental progress including debt restructuring, addressing legal and construction issues, and restoring homebuyer confidence should require time to resolve. Over the next year, we expect NVL to continue focusing on (1) debt restructuring including negotiations with bondholders to extend maturity/asset swaps and (2) working on solving legal and construction issues step by step to deliver houses (presold units) to homebuyers. Key risks: (1) delays in homebuyer’s presales payment, (2) challenges in capital raising to finance debt obligations, and (3) potential dilution risk from rights issue and private placement plans.
Q2 2024 earnings results: NVL released Q2 2024 financial statements (see Figure 4), with Q2 2024 NPAT-MI of VND941bn (USD37mn) vs Q1 2024’s net loss of VND567bn (USD23mn). Accordingly, H1 2024 NPAT-MI was VND374bn (USD15mn), mainly driven by (1) VND4.8tn (USD189mn) of financial income, which included VND2.9tn (USD112mn) of interest income from investment co-operation contracts with third parties and VND1.2tn (USD46mn) of other income, and (2) property handovers mainly at the Aqua City, Novaworld Phan Thiet, and Saigon Royal projects.
Figure 1: Debt restructuring update
Debt type | Debt balance (VND bn) | NVL’s updates at end-Q2 2024 | ||
End-2022 | End-2023 | End-Q2 2024 | ||
Domestic debt (including local bank loans and bonds held by banks) | 26,570 | 23,445 | 24,578 |
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International debt (including USD-denominated loans/bonds or held by foreign institutions) | 23,754 | 21,101 | 21,209 |
• VND5.77tn domestic convertible bonds/CBs (USD226mn) issued to Warburg Pincus and Credit Suisse in May 2022 (maturity: 2032): NVL has reduced the outstanding bonds by VND2.3tn (USD98mn) through a swap agreement in September 2023. • USD300mn 5.25% international CBs: NVL reached an agreement to extend the maturity from 2026 to 2027 and defer the interest payables in July 2024.
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Domestic bonds (mainly held by retail investors) | 12,433 | 10,892 | 8,847 (*) |
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Total | 62,757 | 55,438 | 54,635 (down 1.4% YTD and down 13% vs end-2022) (**) | |
Source: NVL, Vietcap. (*) data reflects bonds that have reached/secured refinancing plans with bondholders, asset swap documents have been completed or in the process of being completed; (**) According to NVL’s Q2 2024 consolidated financial statement, its total debt balance at end-Q2 2024 was VND59.2tn (USD2.3bn; up 2.6% YTD and down 9% vs end-2022).
Figure 2: Legal status and construction update of key projects at end-Q2 2024
Key project | Current legal status | NVL’s anticipated timeline for |
Aqua City | Phases aligned with Bien Hoa City’s master plan (Aqua Riverside 81 ha, Aqua Waterfront City 91 ha, Aqua City 112 ha): re-granted sales permits, under construction and handovers. Other phases: awaiting for revised master plan for Bien Hoa City. | 1/10,000 masterplan for Bien Hoa City: by end-July 2024. 1/5,000 masterplan for Zone C4: August 2024. 1/500 project masterplan: end-October 2024. |
Novaworld Phan Thiet | Seeking to converting annual land lease payment to one-time payment; land use rights fee finalization. Ongoing construction and handovers. | Decision for one-time land lease payment: August 2024 Announcement of land use rights fee: September 2024 Construction permit: October 2024 |
Novaworld Ho Tram | Four phases with completed legal status (The Tropicana, Wonderland, Morito, Habana Island): resumed construction from the beginning of 2024. Three phases with incomplete legal status: Binh Chau Onsen, Happy Beach, and Long Island. | Expecting resolving legal issues and resuming construction for three phases: from August 2024.
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Source: NVL, Vietcap
Figure 3: Total GDV of key projects (VND tn)
Source: NVL, Vietcap compilation
Figure 4: NVL’s Q2 2024 financial results
VND bn | Q1 2024 | Q2 2024 | QoQ | H1 2023 | H2 2023 | H1 2024 | H1 2024 YoY |
Net revenue | 697 | 1,549 | 122% | 1,658 | 3,099 | 2,247 | 35% |
Gross profit | 190 | 433 | 128% | 477 | 845 | 623 | 31% |
Selling expenses | -54 | -86 | 60% | -81 | -211 | -140 | 74% |
G&A expenses | -325 | -363 | 12% | -752 | -739 | -688 | -9% |
EBIT | -189 | -16 | N.M. | -355 | -105 | -205 | N.M. |
Financial income | 640 | 3,952 | 517% | 1,686 | 3,442 | 4,808 | 185% |
Financial expenses | -773 | -2,364 | 206% | -1,705 | -1,539 | -3,137 | 84% |
Other non-operating income | 107 | 0 | N.M. | -6 | 732 | -108 | N.M. |
Profit (Loss) from associates | 1 | 1 | 10% | 4 | -156 | 2 | -47% |
PBT | -214 | 1,573 | N.M. | -371 | 2,370 | 1,360 | N.M. |
PAT | -601 | 946 | N.M. | -1,094 | 1,580 | 345 | N.M. |
NPAT-MI | -567 | 941 | N.M. | -1,012 | 1,618 | 374 | N.M. |
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Gross margin | 27.2% | 27.9% |
| 28.8% | 27.3% | 27.7% |
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SG&A as % of revenue | -54.3% | -29.0% |
| -50.2% | -30.7% | -36.8% |
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EBIT margin | -27.1% | -1.0% |
| -21.4% | -3.4% | -9.1% |
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NPAT-MI margin | -81.3% | 60.8% |
| -61.0% | 52.2% | 16.7% |
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Source: NVL’s financial statements, Vietcap
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