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Company Quarterly Earnings Update – DXG VN – 2019 Q2

Summary of the H1/2019 results of Dat Xanh Group (DXG VN) 

H1/2019 results: highlights
  • DXG achieved net revenue of VND 2,340bn in H1/2019, up by 20.2% yoy, mainly thanks to the strong growth of the brokerage business (+27.6%). The project development business however only posted single-digit revenue growth of 6.6%. DXG’s gross margin declined to 50.3% from 53.2% in same period of last year. Operating profit inched up by 2.6% yoy to VND 724bn. Net profit rose by 28.7% yoy to VND 556bn. But if one excludes a one-off financial gain of VND 220bn from a partial sale of a subsidiary, net profit would have declined by 12.0% yoy.
  • DXG currently has 10 projects in the pipeline, which take up a land area of 32.4 hectares. There are two ongoing projects. The Opal Boulevard project was launched for pre-sales in Q2/2019: it is located in the Binh Duong province, and almost all 1,468 units are now pre-booked. The Gem Riverside project is DXG’s largest project with a total of 3,110 units. DXG reports that buyers deposited for more than 50% of the project’s units. But the sale of the remaining units is currently stopped as HCMC’s authorities are temporary limiting the amount of new construction licenses.
  • The primary supply of apartments has declined sharply by 45% yoy in HCMC in H1/2019 as a result of limited new construction licenses. As a result, the average apartment selling price went up significantly by about 20% yoy (according to CBRE Vietnam). We expect the primary apartment price in HCMC to remain high as land banks in HCMC are becoming more and more scarce, while housing demand should stay solid. We think that the authorities should resume to grant new construction licenses by the end of this year. DXG will benefit from increasing apartment prices as the company has acquired its land banks some years ago at low costs.
  • Due to the lack of revenue from the project development business, DXG’s net profit is expected to decline by 14.8% yoy in 2019 and by 53.8% yoy in 2020, but we think that net profit will surge by 186.0% yoy in 2021 and by another 72.5% in 2022.

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