VRE – Slight QoQ improvement in retail leasing gross profit in Q3 2024 – Earnings Flash & Analyst Meeting Note
  • 2024-10-31T00:00:00
  • Company Research
  • VRE announced its 9M 2024 results with net revenue of VND6.8tn (USD272mn; -9% YoY) (with 86% from retail leasing and 11% from property sales) and NPAT-MI of VND3tn (USD120mn; -10% YoY). The YoY decline in 9M 2024 NPAT-MI was due to a YoY drop in the retail leasing gross margin (-3.1ppts YoY) and YoY lower property sales recognition, partly offset by higher financial and net other incomes. 
  • 9M 2024 revenue and NPAT-MI fulfill 74% and 72% of our full-year respective forecasts. We foresee insignificant change to our 2024F NPAT-MI forecast of VND4.2tn (USD167mn; -5% YoY), pending a fuller review. 
  • Retail leasing segment: The segment reported Q3 2024 results with revenue of VND1.98tn (USD79mn; +2% QoQ and flat YoY), gross margin of 53.7% (-0.2ppts QoQ and -3.6ppts YoY), and leasing NOI margin of 67.5% in Q3 2024 (-0.2ppts QoQ and -3.7ppts YoY). The segment’s gross and leasing NOI margins in 9M 2024 were 55.8% and 69.1%, vs the full-year 2023 of 58.4% and 74.2%, respectively. The average occupancy rate was 84.6% in Q3 2024 (+0.7ppts QoQ but -0.2ppts) vs H1 2024 of 83.4% and the full-year 2023 of 84.8%.
  • Per VRE, the QoQ declines in Q3 2024’s gross and leasing NOI margins were mainly due to increased marketing and sales personnel expenses. Management expects that the margins will slightly improve in Q4 2024G, driven by expected continued improvement in occupancy rates. 
  • VRE added ~80,000 sqm of retail GFA in 9M 2024. In 9M 2024, VRE launched VMM Grand Park (in HCMC; retail GFA of 45,300 sqm) in June, two VCP malls (in Dien Bien Phu and Ha Giang; total retail GFA of 21,700 sqm) in June, and VCP Bac Giang (total retail GFA of 13,400 sqm) in July. 
  • At end-Q3 2024, VRE had a total of 87 shopping malls under operation with a total retail leasing GFA of nearly 1.83 million sqm (vs 83 malls and 1.75 million sqm at end-2023). We currently project VRE’s total retail GFA at end-2024/25F to be 1.84/1.97 million sqm, respectively.  
  • New mall opening plan: VRE has rescheduled its opening plan for a VCP mall in Dong Ha Quang Tri (retail GFA of 14,300 sqm) from September 2024 to Q4 2024G. For 2025G, management targets to open three new malls with a total of ~120,000 sqm retail GFA, including:
    - Two VMM malls – Ocean City (Hung Yen, retail GFA of 53,200 sqm) in Q2 2025G and Royal Island (Hai Phong, retail GFA of 47,600 sqm) in Q3 2025G.
    - One VCP mall – Vinh (Nghe An, retail GFA of 19,000 sqm) in Q4 2025G.
  • Property sales segment: The segment’s 9M 2024 revenue was VND779bn (USD31mn; -48% YoY) and gross profit was VND270bn (USD11mn; -60% YoY) with a total of 156 shophouses delivered in 9M 2024 (mainly delivered in Q2 2024). According to management, VRE’s total end-Q3 2024 unbilled bookings amounted to VND249bn (USD10mn), in which they expect to recognize flat QoQ segment revenue in Q4 2024G and the remainder in H1 2025G. 
  • New property sales plan: VRE is acquiring some commercial components (shophouses) in VHM's Royal Island and Golden Avenue projects, and has deposited ~VND3tn (USD120mn) as of end-Q3 2024. The components encompass ~109,800sqm of GFA, including ~1,000 units in Royal Island and ~200 units in Golden Avenue (figures are subject to change). The company plans to commence presales in H2 2025G, with revenue recognition expected to begin in 2026G. 
  • Cash balance improved QoQ in Q3 2024: At end-Q3 2024, VRE’s cash and cash equivalents (including short-term deposits) was VND4.9tn (USD195mn), up VND2.4tn/USD97mn QoQ but down VND288bn/USD11.5mn YTD. Per management, VRE collected 1) all related-party loans amounting to VND2.35tn (USD94mn) as of September, and 2) the VND1.3tn (USD52mn) deposit from Vinwonders Nha Trang in early October 2024. These collections are broadly in line with management’s previous guidance in July 2024. At end-Q3 2024, VRE’s net D/E was -2.1% vs 3.8% at end-Q2 2024 and -3.3% at end-2023.

VRE’s 9M 2024 results

VND bn

Q1 2023

Q2 2023

Q3 2023

Q4 2023

Q1 2024

Q2 2024

Q3 2024

9M
 2023

9M
 2024

YoY

2024F

9M 2024 as % as 2024F

Net revenue

1,943

2,173

3,333

2,343

2,255

2,479

2,078

7,449

6,811

-9%

9,159

74%

  • Retail leasing

1,913

1,943

1,988

1,952

1,928

1,940

1,983

5,845

5,851

0%

8,194

71%

  • Property sales 

3

197

1,304

267

277

467

36

1,504

779

-48%

965

81%

  • Others

27

32

40

124

50

72

59

99

181

82%

0

N.M.

Gross profit

1,188

1,189

1,700

1,268

1,255

1,209

1,089

4,078

3,554

-13%

4,939

72%

  • Retail leasing

1,181

1,124

1,139

1,113

1,155

1,045

1,066

3,444

3,266

-5%

4,595

71%

  • Property sales 

1

89

578

138

98

156

16

667

270

-60%

343

79%


 

 

 

 

 

 

 

 

 

 

 

 

SG&A expenses

-108

-118

-291

-263

-207

-216

-248

-517

-670

30%

-767

87%

EBIT

1,081

1,072

1,409

1,005

1,048

994

842

3,561

2,884

-19%

4,171

69%

Financial income

224

278

301

343

435

420

383

803

1,239

54%

1,626

76%

Financial expense

-100

-80

-76

-74

-140

-179

-244

-256

-563

120%

-504

112%

Other income

45

-1

22

79

25

42

138

65

204

214%

0

N.M.

PBT

1,249

1,268

1,656

1,353

1,367

1,277

1,119

4,173

3,763

-10%

5,293

71%

NPAT-MI

1,024

1,001

1,317

1,067

1,083

1,021

906

3,341

3,010

-10%

4,182

72%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

61.2%

54.7%

51.0%

54.1%

55.7%

48.8%

52.4%

54.7%

52.2%

 

53.9%

 

  • Retail leasing

61.7%

57.8%

57.3%

57.0%

59.9%

53.9%

53.7%

58.9%

55.8%

 

56.1%

 

  • Property sales 

35.7%

45.0%

44.3%

51.5%

35.3%

33.5%

44.2%

44.4%

34.6%

 

35.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBIT margin

55.6%

49.3%

42.3%

42.9%

46.5%

40.1%

40.5%

47.8%

42.3%

 

45.5%

 

NPAT-MI margin

52.7%

46.1%

39.5%

45.6%

48.0%

41.2%

43.6%

44.9%

44.2%

 

45.7%

 

Source: VRE’s financial statements, Vietcap forecast (last updated August 15, 2024)

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