Summary of the 9M 2018 results of Kinh Bac City (KBC VN)
9M/2018 results: highlights
- KBC’s 9M/2018 net revenue was up strongly by 64.4% to VND 1,661bn, mainly thanks to robust sales of the industrial park (IP) development business. The company sold a total of 75.6 hectares of IP land, up by 137.4% yoy. While the IP development business has outperformed our expectations, the residential development business trailed due to some delay in handover activities.
- The company’s gross margin improved to 57.7% from 52.7%. KBC’s IPs were developed a long-time ago and have benefited from steadily rising land selling prices. Operating profit surged by 87.3% yoy, but net profit fell by 9.8% yoy as there was no one-off financial gain like last year.
- Cash and cash equivalents accounted for 4.3% of total assets. Financial leverage was low with a D/E ratio of 0.40x and a D/A ratio of 0.23x. The book value of all operating projects was VND 8,146bn, accounting for 49% of total assets.
- Vietnam is the most obvious destination to replace China as the world’s work bench as China is moving up the value chain. KBC’s IP development business is likely to benefit from the continued solid FDI inflows into Vietnam in coming years.
- Prospects for KBC’s residential development business are also bright. KBC’s residential land is located in Bac Ninh and in Hai Phong, the two fastest growing cities in the North of Vietnam: Housing demand in these areas is expected to grow rapidly to meet the needs of the rapidly rising labor force.
- The company’s net profit is expected to improve by 8.4% yoy in 2018 thanks to the strong performance of its IP development business. In 2019, net profit should even go up by 78.6% yoy thanks to increasing contribution from the residential development business; the Phuc Ninh UZ should be the main driver here.
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