Equity Analysis /

Vietnam Industrial Real Estate: All mixed

    Thu Pham
    Thu Pham

    Industrial Real Estate

    Rong Viet
    16 September 2019
    Published by

    In this 17-page report on Vietnam's industrial real estate sector we provide detailed analysis of Kinhbac City Development, Viglacera, Long Hau and Nam Tan Uyen

    Business results, in general, have been strong

    • Revenue and NPATMI of some popular players increased an average of 20% and 39%, respectively.
    • Growth was dominated by smaller-scale developers (TIP, SIP, VRG, D2D). However, we see growth drivers did not come from leasing activities, for this group.

    Increase in leasing sales was modest, except for KBC and VGC

    • Southern smaller-scale groups (D2D, SZL, TIP) had almost no room left for lease.
    • KBC had a 66% hike in leasing sales, while VGC got 101.5 ha leased out, up 345% YoY.
    • A major part of LHG’s earnings, meanwhile, came from re-leasing activities.

    We remain our positive outlook on developers that have huge land banks left

    • KBC and VGC have a huge leasable land bank remaining, which we estimate at 953 ha for KBC and 1,182 ha for VGC. These land banks represent a major part of northern industrial land and possess favourable locations, mostly in Bac Ninh, Hai Phong.
    • BCM and PHR are similarly placed in the south, owning enormous areas of industrial land, more than 1,000 ha each, located in Binh Duong.

    But we acknowledge there are risks, which may cause development costs to surge and curtail upside potential when rental price increases. These include:

    • Lingering compensation (Long Hau3 zone -LHG; HuuThanh zone -IDC).
    • Paper issues relating to land adjustment (Nam Son Hap Linh -KBC) or the waiting period to get an investment license (TrangDue 3 -KBC).
    • Others relating to land availability, which was the case of Nam Tan Uyen 3 -NTC and VSIP 3.
    • A stricter and prolonged approval process for a new zone to set ground should affect incoming supply.
    • Increasing land-used-right cost for those who bear it.