Industrial real estate values ​​in the spotlight

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Impressive growth in the first half Alongside the recent rally in the VN index, stocks of industrial park developers have risen steadily since their lows in mid-July.

Impressive growth in H1

Alongside the recent rally in the VN index, stocks of industrial park developers have risen steadily since bottoming out in mid-July. Since then, many of these stocks have risen in price, regaining investor confidence. Apparently, the growth momentum of industrial real estate stocks is supported by their positive trading results in the first half of the year, as well as their huge potential for future growth.

A typical example is Viglacera Corporation, whose net revenue in the second quarter was approximately VND 4.26 trillion, up 45% year-on-year, which carried its revenue over six months to more than VND 8.1 trillion, up 53%, with Profit before tax of VND 1.74 trillion, up 121%. The main reason for the improvement in its commercial activities in the second quarter is the industrial real estate segment which plays the main role, with a major contribution to the profit growth. Previously, Viglacera’s 2022 general shareholders’ meeting reached consensus on targets of VND 1.7 trillion in consolidated pre-tax profit and VND 15 trillion in revenue for that year. Thus, after six months, the company had already achieved 54% and 102% of its revenue and profit plans respectively.

Similarly, IDICO Corporation achieved impressive results in the second quarter, with consolidated net sales reaching almost VND 3.31 trillion, 2.6 times more than the same period last year. After deducting expenses, the parent company’s after-tax profit was VND 1.42 trillion, more than six times the figure for the previous year. The rise in its profit in the second quarter was attributed to the recognition of its contracts in industrial parks such as Nhon Trach 5, Phu My 2 and Phu My 2 Expansion and Huu Thanh. This happened after these projects met the conditions for unique revenue recognition. Overall, in the first six months of the year, IDICO’s after-tax profit amounted to some VND 1.75 trillion, 5.1 times more than in the first half of the year. last, hitting 79% of its profit target for this year.

Two other major industrial park developers, the Industrial Development and Investment Company (Becamex IDC) and the Industrial Parks Development Company (Sonadezi) also saw dramatic profit growth in the second quarter. Specifically, Becamex IDC achieved nearly VND 1.98 trillion in revenue during this period, a 12% year-on-year increase, with an after-tax profit of approximately VND 979 billion. up 88%. The main contributor to these results was their sales of real estate and investment properties, which amounted to some VND 1.510 billion. In the first six months, Becamex IDC generated over VND 3.35 trillion in revenue and around VND 1.37 trillion in profit after tax.

Meanwhile, in Sonadezi, its second-quarter revenue increased by 4% to almost VND 1.32 trillion, of which its industrial parks generated some VND 337 billion, an increase of almost 47%. . Not only their core operations, but Sonadezi’s income from financial investments also increased by 75%, totaling almost VND 210 billion. As a result, the company posted a net profit of more than 255 billion VND in the second quarter, up 36%. Thanks to the positive results in April-June, Sonadezi’s after-tax profit in January-June 2022 increased by 10% year-on-year to reach VND 671 billion.

Great potential

With many favorable conditions, industrial real estate in Vietnam has great potential for future growth. Production costs, such as labor, land rent, electricity and water, are lower than other countries in the region, so Vietnam is one of the beneficiaries of the “China plus one” strategy that multinationals adopt to avoid doing business only in China and to diversify their activities in other countries. Given the rapid growth of e-commerce and the diversification of large foreign companies in Vietnam, developers of industrial parks with available land in the urban environs that develop ready-made factories could attract attention.

The RongViet Securities Company (VDSC) said in a recent report that the two main segments of industrial real estate to experience a business boom would be land for rent and ready-made factories for rent. Rental rates are expected to increase further as demand continues to increase and supply is limited, according to VDSC.

For this reason, investors who have already made compensation for site clearance and paid land use fees will benefit more through low costs, while rents increase.

Sharing the same view, the analysis department of SSI Securities Corporation (SSI Research) expects the after-tax profit of the industrial real estate sector in the second half of 2022 to increase by 47.3% compared to the same period last year. This is due to the demand for industrial land, which is expected to pick up positively as the economy reopens, as well as the fact that rents are still expected to increase by an average of 8-20% year-on-year. , depending on the region.

Looking further ahead, demand for industrial land will continue to rise in 2023 as the trend of shifting production from China to Vietnam continues. In addition, FDI promotion policies will encourage investors to return to do business in Vietnam, including preferential policies such as corporate tax exemptions for the first four years of operation, 50% reduction corporate tax for the next five years, and many other incentives.

Infrastructure improvement in the near future, which is evident in Ring Road No. 3, Ring Road No. 4, Bien Hoa-Vung Tau Expressway, Dau Giay-Phan Thiet Expressway, Cai Mep-Thi Port Vai and the Gemalink port, will help strengthen connectivity between industrial areas. Next year, the net profit of listed industrial park developers is expected to increase by 18% year on year when the total area of ​​land for rent increases by 10% per year. At the same time, land rent is expected to grow by 8% in industrial parks in southern Vietnam and 6% in the north.

In general, with the potential above, it will come as no surprise that industrial real estate stocks continue to attract investor attention through the end of the year.

Source: Saigon Times

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