Buy

Current price (04-24-19): VND 29,750

Target price:  VND 32,000

Upside:  7.6%

Key Takeaways

• Acquiring 3 large projects to ensure business sustainability and growth strategy.
• Exploiting new business areas to create recurring income.
• 1Q19 PATMI increased 458% YoY.

Acquiring 3 large projects to ensure business sustainability and growth. NLG has entered into three contracts to acquire new land sites in Dong Nai (NL Dai Phuoc – 45ha; Waterfront – 170ha) and Hai Phong (NL Hai Phong – 21ha). Total area of these projects is 236ha, equivalent to 50% of the landbank that NLG developed over the past 15 years.

Expanding business scope to create recurring revenues. NLG plans to develop educational facilities, hospitals, and shopping centers using 65ha of landbank. This should increase the attractiveness of its residential projects and also create recurring income. NLG expects these new businesses to account for 30% of total revenues over the next decade, vs less than 1% now.

New launches are on schedule. NLG plans to launch Waterpoint Phase 1 and Akari City in 2Q19 and Mizuki Park in 3Q19. This is persistent with the schedule it set in 2018.

Dividend plan. NLG guides for a payout ratio of 25% for 2019 (i.e., c. VND 1,000/share) vs approximately 167% in 2018.

458% YoY increase in 1Q19 PATMI was mainly from the revaluation of its subsidiary Viet Thien Lam, which owns the 45-hectare Paragon Dai Phuoc Project in Nhon Trach, Dong Nai province. This revaluation gain was recognized in “other income”.

Our view:  We believe that the acquisition of three new projects is a reasonable long-term strategy because these projects are located in fast-growing cities (i.e., Dong Nai and Hai Phong). If the government invests more in transport infrastructure near these projects, the market’s liquidity at these projects will improve. In addition, NLG is building recurring income streams, which should help to minimize the impact of market cyclicality. We remain cautious on the property sector as a whole. But NLG’s management is executing well to create a solid foundation for the long term, in our view, and we reiterate our BUY recommendation.

Please access the link for our complete report: NLG — AGM takeaways Staying-power boosted by new projects

Analyst: Tam Nguyen, tam.nguyen@yuanta.com.vn