Company Quarterly Earnings Update – KBC VN – 2018 H1

Summary of the H1 2018 results of Kinh Bac City (KBC VN) 

H1/2018 results: highlights
  • Net revenue increased strongly to VND 1,004bn, up by 107% yoy in H1/2018, mainly thanks to strong sales of the industrial park (IP) development business. The company delivered a total of 51.4 hectares of IP land, up by 312% yoy.
  • The company´s gross margin declined to 54.0% from 56.5% in H1/2017, above all due to the lower sales contribution from the residential development business, which has the highest gross margin of all business lines. KBC’s operating profit expanded by 128.7% yoy, but net profit fell by 34.9% as there was no one-off financial gain like last year.
  • Cash and cash equivalents accounted for 3.7% of total assets. Financial leverage was low with a D/E ratio of 0.40x and a D/A ratio of 0.23x.
  • Thanks to their strategic locations and dynamic economies, Southeast Asian countries are likely to steadily replace China as the new global production hub. We believe that Vietnam is one of the most attractive destinations among Southeast Asian countries thanks to lower labor costs and affordable industrial land prices. What’s more, the trade tensions between the U.S. and China urge regional manufacturers to increase production in Vietnam and to reduce exposure to China.
  • KBC’s residential development business with its excellent strategic locations will be driven by solid housing demand in Vietnam, the increase of an affluent population and the need for improvement in infrastructure.
  • The company’s net profit is expected to improve strongly in H2/2018, thanks to the contribution from residential land sales. The bottom line should grow by 82.4% yoy in all 2018, but is expected to decline by 11.0% yoy in 2019 as IP and residential land deliveries are expected to fall somewhat.

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