VRE – New malls opened, shophouse deliveries surged [In-line] – Earnings Flash

• 2Q24 net profit rose 2.1% YoY, mainly thanks to the delivery of 104 shophouse units compared to 23 units delivered in 1Q23, fueling 3.9% YoY growth in 1H24 net profit.
• 1H24 results were in line with our forecast, as revenue and net profit completed 49.0%/51.8% of our full-year projections, respectively.
• We see minimal pressure on our target price of VND29,600, which we will update after further review.

Property deliveries saw strong growth while leasing activities slowly recovered

Vincom Retail’s 2Q24 revenue was VND2.48tn (USD99mn), increasing 14.1% YoY and 9.9% QoQ, while 1H24 revenue reached VND4.73tn (USD189mn, +15% YoY):

(1) Retail space leasing revenue in 2Q was VND1.94tn (USD78mn), up 0.6% QoQ but decreasing 0.2% YoY as newly leased areas signed at end-June had not contributed to leasing revenue for the period. The average occupancy rate in 2Q24 reached 83.9%, increasing 1.1% pts QoQ but declining 1.6% pts YoY. 1H24 leasing revenue reached VND3.87tn (USD155mn), +0.3% YoY.

(2) Revenue from shophouse deliveries in 2Q was VND467bn (USD19mn), accelerating 137% YoY and 68.7% QoQ, following the deliveries of 104 units from Vincom Shophouse Royal Park. 1H24 property delivery revenue reached VND744bn (USD30mn), +272% YoY. VRE has remaining unbilled shophouses of VND230bn in value, which should be recognized in 2H24.

Net profit was up 2.1% YoY and down 5.6% QoQ to VND1.02tn (USD41mn) in 2Q24, contributing to VND2.1tn (USD84mn, +3.9% YoY) in 1H24.

GPM hurted by higher proportion of property sales and seasonal, one-off costs

2Q24 gross profit margin (GPM) was 48.8%, down 6.9% pts QoQ due to higher energy consumption during summer season and down 5.9% pts YoY due to: 1) higher electricity price; 2) higher land cost, due to the expiration of the Government’s land waver policy (issued during the Covid-19 pandemic) for some shopping malls; 3) increasing provison expenses relating to a tenant in entertainment category; 4) higher contribution of shophouse deliveries activity which has lower GPM.

Two shopping malls to be launched in 2H24

VRE expects to launch Vincom Plaza (VCP) Bac Giang by July and VCP Dong Ha Quang Tri by September 2024. Vincom Mega Mall (VMM) Ocean City is rescheduled to open in April 2025.

In June 2024, VRE opened three new malls (VMM Grand Park, VCP Dien Bien Phu, VCP Ha Giang) and reopened VCP 3/2. The occupancy rate in VMM Grand Park is now at 94%, and 86%/95% in VCP Dien Bien Phu and VCP Ha Giang.

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