- 2024-07-22T00:00:00
- Company Research
- VRE announced YoY improvements in its H1 2024 net revenue of VND4.7tn (USD186mn; +15% YoY) (with 82% from retail leasing and 16% from property sales) and NPAT-MI of VND2.1tn (USD83mn; +4% YoY). YoY growth in the H1 2024 NPAT-MI was mainly due to the YoY increase in property sales recognition and financial income, partly offset by the YoY lower gross profit in retail leasing.
- As H1 2024 NPAT-MI fulfilled 50% of our full-year forecast, we foresee insignificant changes to our 2024F NPAT-MI forecast, pending a fuller review.
- Retail leasing segment: The segment reported Q2 2024 results with revenue of VND1.94tn (USD76mn; +1% QoQ and flat YoY), gross margin of 53.9% (-6.0ppts QoQ and -3.9ppts YoY), and leasing NOI margin of 67.7% in Q2 2024 (-4.6ppts QoQ – broadly in line with VRE’s statement at its April 2024 earnings call). The average occupancy rate was 83.9% in Q2 2024, +1.1ppts QoQ but -0.9ppts vs the full-year 2023 of 84.8%.
- Per VRE, the YoY declines in H1 2024’s gross and leasing NOI margins were mainly due to 1) an increase in seasonal energy costs, 2) increased land rent costs as the Government’s support on land rent waivers at some malls for COVID-19 expired at the beginning of 2024, and 3) an increased provision expense, mostly related to one tenant in the entertainment category.
- Property sales segment: The segment’s H1 2024 revenue of VND744bn (USD29mn; +3.7x YoY) and gross profit of VND254bn (USD10mn; +2.8x YoY) with a total of 149 shophouses delivered in H1 2024 (in which 104 units were delivered in Q2 2024). According to management, VRE’s total end-Q2 2024 unbilled bookings amounted to VND230bn (USD9mn), which they expect to recognize mostly in H2 2024G.
- VRE added ~67,000 sqm retail GFA in June 2024. VRE launched VMM Grand Park (in HCMC; retail GFA of 45,300 sqm; secured occupancy rate of 94% at end-June 2024), and two VCP malls (in Dien Bien Phu and Ha Giang; retail GFA of ~10,000-12,000 sqm per mall; secured occupancy rate of 86-95% at end-June 2024) in June 2024, vs the previous management guidance in April 2024 to open VMM Grand Park and three VCP malls in June 2024. Additionally, VRE completed renovations and re-opened VCP 3 Thang 2 in HCMC in June 2024, with an occupancy rate of 82% at the re-opening date vs 56% in Q2 2023. At end-Q2 2024, VRE has total 86 shopping malls under operation with a total retail leasing GFA of 1.81 million sqm (vs 83 malls and 1.75 million sqm at end-Q1 2024).
- New mall opening plan: For H2 2024G, managements guides for two VCP malls - Bac Giang and Dong Ha Quang Tri (with total retail GFA of ~27,600 sqm) to open in July and September, respectively, while rescheduling the opening of VMM Ocean Park 2 (retail GFA of ~76,700 sqm) to April 2025. This revised guidance is in line with our current projections.
- Balance of transactions with related parties: As of end-Q2 2024, VRE’s lending balance to related parties and VRE’s deposit balance for the purpose of mall pipeline development under BCCs with VIC/VHM were a total of VND16.1tn (USD632mn; +11% QoQ and +36% YTD) and accounted for 30.8% of total assets, vs 29.7% in end-Q1 2024. In addition, the Q2 2024 increase of VND 3.3tn (USD131mn) in VRE’s other payables of deposit under BCC was a deposit amount VRE received from a non-related partner for a future cooperation, per VRE.
- VRE’s asset loans to VIC/VHM: Management provided further clarification regarding the related party transaction (VRE’s lending tangible assets to VIC/VHM, per a BOD Resolution dated June 27, 2024) as follows:
- These assets are Vincom Center Landmark 81 (HCMC) and Vincom Center Pham Ngoc Thach (Hanoi), which will serve as collateral for VIC/VHM’s increasing the credit lines at local banks for future property project development.
- The loans are intended to expedite VHM’s property project development in mega-scale property projects (i.e., Can Gio and Ha Long Xanh), benefiting both VIC/VHM and VRE.
- VRE's management stated that the decision to lend assets is evaluated based on the 1) anticipated benefits for VRE, such as expediting the land acquisition process to secure land at a lower cost, and 2) VHM’s robust sales capability and cash flow position.
VRE’s H1 2024 results
VND bn | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | H1 | H1 | H1 2024 vs | 2024F | H1 2024 as % as 2024F |
Net revenue | 1,943 | 2,173 | 3,333 | 2,343 | 2,255 | 2,479 | 4,116 | 4,733 | 15% | 8,867 | 53% |
| 1,913 | 1,943 | 1,988 | 1,952 | 1,928 | 1,940 | 3,857 | 3,867 | 0% | 8,570 | 45% |
| 3 | 197 | 1,304 | 267 | 277 | 467 | 200 | 744 | 272% | 297 | 250% |
| 27 | 32 | 40 | 124 | 50 | 72 | 59 | 122 | 106% | 0 | N.M. |
Gross profit | 1,188 | 1,189 | 1,700 | 1,268 | 1,255 | 1,209 | 2,378 | 2,465 | 4% | 5,122 | 48% |
| 1,181 | 1,124 | 1,139 | 1,113 | 1,155 | 1,045 | 2,305 | 2,200 | -5% | 5,012 | 44% |
| 1 | 89 | 578 | 138 | 98 | 156 | 90 | 254 | 183% | 110 | 231% |
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SG&A expenses | -108 | -118 | -291 | -263 | -207 | -216 | -226 | -423 | 87% | -685 | 62% |
EBIT | 1,081 | 1,072 | 1,409 | 1,005 | 1,048 | 994 | 2,152 | 2,042 | -5% | 4,437 | 46% |
Financial income | 224 | 278 | 301 | 343 | 435 | 420 | 502 | 855 | 70% | 1,303 | 66% |
Financial expense | -100 | -80 | -76 | -74 | -140 | -179 | -180 | -319 | 77% | -426 | 75% |
Other income | 45 | -1 | 22 | 79 | 25 | 42 | 43 | 66 | 53% | 0 | N.M. |
PBT | 1,249 | 1,268 | 1,656 | 1,353 | 1,367 | 1,277 | 2,517 | 2,644 | 5% | 5,314 | 50% |
NPAT-MI | 1,024 | 1,001 | 1,317 | 1,067 | 1,083 | 1,021 | 2,024 | 2,104 | 4% | 4,198 | 50% |
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Gross margin | 61.2% | 54.7% | 51.0% | 54.1% | 55.7% | 48.8% | 57.8% | 52.1% |
| 57.8% |
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| 61.7% | 57.8% | 57.3% | 57.0% | 59.9% | 53.9% | 59.8% | 56.9% |
| 58.5% |
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| 35.7% | 45.0% | 44.3% | 51.5% | 35.3% | 33.5% | 44.9% | 34.2% |
| 37.1% |
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EBIT margin | 55.6% | 49.3% | 42.3% | 42.9% | 46.5% | 40.1% | 52.3% | 43.1% |
| 50.0% |
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NPAT-MI margin | 52.7% | 46.1% | 39.5% | 45.6% | 48.0% | 41.2% | 49.2% | 44.5% |
| 47.3% |
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Source: VRE’s financial statements, Vietcap forecast (last updated May 22, 2024)
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