[KDH VN] Multiple positive catalysts

KDH VN

BUY

TP upside +31%

Close 28 July 2020

Price VND 23,700

12M Target VND 31,100

Previous Target VND 31,100

Change 0%

Homebuyers are willing to pay a premium for KDH’s houses due to its prestigious brand name. The company only sells to homebuyers when the project’s full legal procedures has been completed, which usually allows for rapid pink book transfer to buyers once the project is completed. Additionally, anecdotal evidence indicates that homebuyers typically appreciate the quality of KDH units, which is not always true of all developers.

Stable business operations despite the property sector’s various headwinds. KDH’s current projects remain on schedule and units have been delivered on time as committed to homebuyers. Earlybird buyers at the Verosa Park project in 3Q19 have received their units, and KDH has been delivering units at the SaFira project since early July. Additionally, the take-up rate of both projects is solid.

2020 results outlook. On this basis, KDH guides for 2020E revenue at VND3.5tn (+23% YoY) and net income at VND1.1tn (+20% YoY). We forecast slightly higher (+8.5%) revenue of VND3.8tn but only higher (+1.5%) earnings (VND1.1tn), which is likely due to differences in assumptions for operating expenses.

Well positioned for future income growth. KDH plans to launch the next tranches of Lovera Vista this year, with unit delivery to homebuyers to begin in 2Q21. The company also plans to launch two lowrise projects in 2H20: 1) Clarita, a 5.7-hectare, 160-unit project in District 2, and 2) Armena, a 4.3-hectare, 180-unit project in District 9.

Our view: Most developers rely on funding from homebuyers before completing the required administrative procedures, resulting in buyer headaches when administrative frictions delay the issuance of pink books. Thus, a property developer’s reputation is crucial. We believe that KDH has this reputational advantage, and its substantial landbank in prime locations is a solid foundation for KDH’s operations in the years to come.

KDH also maintains a strong balance sheet, which is another key attraction, especially given the current macro uncertainties. Given that KDH’s projects under development are on schedule, we make no changes to our valuation. Our per-share fair value estimate for KDH is VND31,100, offering 33% expected 12-month total shareholder return. We thus maintain our BUY recommendation.

For the complete report, please access here: Company update-KDH-Multiple positive catalysts

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