Initiation of coverage (KDH VN) — Slow and steady wins the race

KHANG DIEN HOUSE (KDH VN)

BUY

Upside +17.1%

Close 26 Nov 2019

Price VND 26,550

12M Target VND 31,100

HCMC landbank of c.450ha is a key competitive advantage that sets the stage for long-term sustainable business development. The western area of HCMC accounts for 78% of the company’s c.450ha of total landbank, with 20% in the southern area of HCMC.

This should provide strong pricing power given HCMC’s landbank shortage amid rapid economic growth and widespread delays to legal approvals for property development projects.

KDH appears less exposed to peers to the HCMC legal problems given to the history of its landbank acquisition (discussed inside this note).

Strong financial position with debt / equity of just 0.11x as of 3Q19, far less than the sector’s total of 0.55x and arithmetical average of 0.47x. We see this as positive given the implied low exposure to cyclical/macro risks, especially vs. its many highly leveraged peers.

Steady earnings outlook is supported by several projects that are under construction. 1) SaFira (c. 1,570 condos) is nearly 100% presold. 2) Lovera Vista (c. 1,310 condos) officially launched its first tranche in Oct 2019 and homebuyers can currently book units at the subsequent phase. 3) Verosa Park (c. 296 low-rise units) officially launched its first tranche in Sep 2019 and this is now under construction.

Yuanta vs consensus. Our target price of VND31,100 per share is 4.8% above the consensus. This is likely because we used official average selling prices for Lovera Vista and Verosa Park in our model, which is higher than the Street. We also believe that these prices will become a new (and higher) market benchmark, so we also expect premium ASPs at the future projects such as Clarita, Corona, and Armena.

We initiate coverage on KDH with a BUY rating. Our RNAV valuation derives a target price of VND 31,100, implying 19% 12-month TSR.

Please access the link for our complete report: KDH Initiation (BUY) — Slow and steady win the race

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