Company Quarterly Earnings Update – DXG VN – 2020 Q1

Summary of the 2020 Q1 results of Dat Xanh Group JSC (DXG VN)

Q1/2020 results highlights:
  • DXG’s sales declined by 59.8% y/y to VND 602bn in Q1/2020 as there was no project handover to book in the reporting period. Revenue of the brokerage business declined by 16.6% y/y as a result of the slowdown in brokerage activity due to the impact of the Covid-19 outbreak. The gross margin improved to 60.5% in Q1/2020 from 46.8% in Q1/2019 thanks to the higher sales contribution from the brokerage business. The company’s net profit was down by 78.0% to VND 67.5bn in Q1/2020.
  • The whole real estate market Ho Chi Minh City (HCMC) has softened as the city authority ceased granting licenses for new property projects in an effort to crack down corruption since 2019. Although all DXG’s projects are clean, the company was also affected by such regulation. However, DXG promptly acquired land to develop its own projects in nearby provinces. DXG successfully launched the Opal Boulevard apartment complex and pre-sold all 1,468 units. It has acquired 92 ha of land in the Dong Nai province. The project includes about 3,921 land lots and low-rise houses. It should generate a net profit of about VND 1,800 bn from 2020 to 2022.
  • The housing demand in HCMC and the nearby area is very solid and has a high growth potential. Citizen people are shifting from self-built houses to buy houses and apartments from real estate developers. DXG owns a valuable land bank in HCMC, that provides significant financial upside potential when the city’s licensing issue is resolved. In our view, this should happen by the end of this year at the latest.
  • Despite the impact of the Covid-19 and the postponement of DXG’s projects in HCMC, we think that DXG can still generate a nice net profit of VND 988bn, down by 18.8% y/y in 2020, before enjoying an expected jump of 89.2% y/y to VND 1,869bn in 2021. The Long Thanh project will be the main earnings driver in 2020 and in 2021. It is benefiting from rapidly rising investments at the Long Thanh International airport, including the infrastructure needed to connect the airport and HCMC.

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