NLG_BUY_TP 53,500_Upside 25.0_Sales hit a new record _BSC_Vietnam company update

Valuation  

Compared to the "Hold" recommendation in the Q1/2022 strategic report, Nam Long's stock price has had a sharp downward adjustment due to the general influence of the stock market and the real estate industry. Therefore, recording the discount rate strongly depreciated from historical RNAV levels.

We recommend to BUY NLG but adjust our target price down to 53,500 VND/share (+25% from the closing price on August 26, 2022) based on changing several assumptions. Including RNAV method based on assumptions (1) Adjustment of project WACC = 12%, (2) Apply 10% discount to industry and market risk, and (3) Increase selling price by one project number (Izumi City, Akari City).

Forecasting business performances

• BSC forecasts that NLG's 2022 revenue and profit will reach 7,374 billion VND (+41.7% YoY) and the parent company's profit after tax will reach 1,220 billion VND (+14% YoY). EPS FW 2022 = 3,185 VND. PE FW 2022 = 14.3 times, PB FW 2022 = 1.6 times.

Investment Thesis

• Total opening and selling value in the period 2022-2023 are the highest compared to mid-cap real estate businesses.
• Owning a large land bank (681 ha) with a high number of projects available for sale (7 projects) ensures profit growth in the period of 2023-2025.

Risks

• The plan to open and sell projects has been delayed due to legal issues and the Covid-19.
• General real estate industry risks (interest rates, industry cycle).

Business Update

• Revenue increased sharply by 187% over the same period. However, profit declined as no other profit was recognized from revaluation of assets. The parent company's revenue and profit after tax reached 1,828 billion VND (+187% YoY) and 111 billion VND (-73% YoY).
• Total pre-sales in the first half of 2022 exceeded 42% of the realized value in 2021, reaching VND 8,410 billion. Accumulated to June 31, 2022, NLG recorded total new sales of 8,410 billion VND (+87% compared to the same period in 2021), with about 1,538 products being sold in 5 projects.