Kinh Bac City Development (KBC VN) – The Giant Has Awakened

BUY

Upside +44%

Close 7 April 2021

Price VND 38,400

12M Target VND 56,200

Proxy on Vietnam’s role in the diversification of global manufacturing. KBC’s vast landbank is located in prime industrial regions, a key advantage in the context of surging demand for factory set-up and expansion amid limited supply of industrial park (IP) land. We estimate that KBC has 176ha of available-for-lease area in 2021 and signed MOUs on 60ha of IP area, the latter of which could come into operation as early as 1H21.

Ready for robust growth. We estimate that KBC has prepared 4,321ha of IP area and 400ha of urban area in addition to the projects that it has already announced. Specifically, KBC established three new subsidiaries in 1Q21 to develop projects in Hung Yen, Vung Tau, and Long An. We believe these projects have considerable potential given their prime locations, limited available land, and increasing demand.

Poised for a rerating, KBC’s financials have underperformed historically due to extended project delays, but the situation has improved. Bulk sales at Trang Cat and positive developments in the administrative procedures at KBC’s other projects (e.g, Trang Due IP phase 3, NSHL, and Vung Tau) have fortified the company’s outlook.

We initiate coverage with a BUY rating and target price of VND 56,200, implying 46.6% 12-month TSR. KBC is an optimal proxy on Vietnam industrial property, which should be supported by such factors as resilient global demand, diversification of manufacturing from China, and the domestic infrastructure rollout. The stock has returned 59% YTD, but in our view, the rerating is only just getting started.

Timing is everything. Investors might consider waiting for the details of KBC’s capital issuance to be discussed at the AGM on Saturday (April 10).

For the complete report, please access here: Initiation-KBC_The Giant Has Awakened

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