VRE announced its Q4 2022 results with net revenue of VND2.1tn (USD88.3mn; +4% QoQ & +52% YoY) and NPAT-MI of VND791bn (USD33.5mn; flat QoQ) vs only VND122bn (USD5.2mn) in Q4 2021. We note that earnings in Q3 and Q4 2021 were a very low base due to the fourth wave of COVID-19 in Vietnam that resulted in VRE offering a VND925bn (USD39.2mn) and VND766bn (USD32.5mn) support package to tenants in those two quarters, respectively.

For full-year 2022, VRE’s net revenue (of which the retail leasing segment accounted for 93%) was VND7.3tn (USD309.7mn; +24% YoY) with NPAT-MI of VND2.7tn (USD115.9mn; +108% YoY), beating management’s guidance by 14%. VRE spent VND2.1tn (USD89.6mn) for a tenant support package in full-year 2021 vs VND464bn (USD19.7mn) in Q1 2022 and a minimal amount in the rest of 2022.

Minimal tenant support package in Q2 - Q4 2022 and higher efficiency bolstered the retail leasing segment’s strong profit growth in 2022. According to management, footfall at VRE’s malls in 2022 increased 93% YoY, and footfall at Hanoi and HCMC malls in Q4 2022 recovered to 90%-95% of the pre-COVID Q3 2019 level. In 2022, the retail leasing segment’s revenue increased 45% YoY to VND6.8tn (USD288.6mn) while gross profit surged 82% YoY to VND3.6tn (USD154.2mn) mainly thanks to the minimal tenant support package in Q2-Q4 2022. Management also shared that the company does not expect to offer a support package in 2023 and will focus on significantly increasing occupancy and rental rates of existing malls, which contribute to the main part of VRE’s valuation.

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