INVESTMENT THESIS
Khang Dien House Investment and Business Corporation (HSX: KDH) operates in the field of residential real estate investment, development, and business with a land bank of approximately 650 hectares in the East, South and West areas of Ho Chi Minh City.
The short-term forecast remains bleak with anticipated low performance in Q2 and Q3/2024 financial results. In Q1/2024, KDH only recorded net revenue of VND334 billion (+21.5% y-o-y; achieving 8.6% of the plan) and a net profit after tax of VND64 billion (-68.2% y-o-y; achieving 8.1% of the plan). With the majority of revenue and profit in 2024 coming from the Privia project (all 1,043 apartments sold), we forecast that the business results for the next two quarters will not be positive until this project is completed and handed over in last months of 2024.
The large land bank ensures long-term growth. KDH is holding 650 hectares of land bank with an inventory value of up to VND20,491 billion, including:
•In the eastern area of Ho Chi Minh City: The low-rise areas of the two projects Emeria and Clarita (total of 11 hectares, including 200 villas/townhouses and 600 apartments) will be launched for sale at the end of 2024 and will record revenue/profit in 2025-2026. These are two projects in cooperation with Keppel Corporation (in which KDH holds 51%) and were started in 2023. Besides, KDH is completing the legal procedures for the Binh Trung urban area project (18.4 hectares) to soon put it into business.
•In the southern and western areas of Ho Chi Minh City: The Solina project (16.42 hectares, 867 apartments and 218 villas/townhouses) is expected to be implemented in 2025 and record revenue/profit in the 2026-2027 period. The Le Minh Xuan Industrial Park project, with a scale of 109.9 hectares (Phase 1: 89 hectares has received the land lease decision and is completing legal procedures), is expected to be put into business in 2025. In addition, KDH is in the process of completing legal procedures for the Tan Tao residential area project (329.9 hectares) and the Green Village project (29.8 hectares) to put them into business in the 2026-2027 period.
Prospects:
•Long-term growth potential benefits from the increasing demand for housing and the abundant land fund of up to 650 hectares in Ho Chi Minh City.
•Business results from Q4/2024 are expected to recover strongly as many projects are completed and handed over.
•The early application of the Land Law, Housing Law, and Real Estate Business Law on August 1, 2024, is expected to resolve legal obstacles and promote the recovery of the real estate market.
Risk:
•Legal risks have caused the progress of large projects such as Tan Tao to be slower than expected, and the impact of rising interest rates has affected the demand for real estate ownership.
RECOMMENDATIONS
OUTPERFORM recommendation with 1-year target price of VND44,850/share and potential upside of 19.2% based on relative valuation and RNAV method. Currently, KDH's stock price is trading at a P/B ratio of 1.9 times, lower than the 5-year average P/B ratio of 2.3 times.
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