Summary of the Q1/2019 results of Kinh Bac City (KBC VN)
Q1/2019 result highlights
- The Q1/2019’s result was affected by low bookings of the industrial park (IP) development business. However, KBC has achieved good selling progress in Q2/2019 so far. This should lead to accelerating growth in coming quarters when KBC will deliver sold land to customers. KBC’s net revenue declined by 23.3% yoy in Q1/2019 to VND 499.8bn. The company sold a total of 15.7 hectares of IP land compared to an area of 33.4 hectares in the same period of last year.
- The gross margin declined to 48.3% from 56.6% in Q1/2018 due to the change in the sales mix of the IP development business. Net profit after minority interest declined by 57.4% yoy to VND 88.9bn.
- Cash and cash equivalents accounted for 3.5% of total assets. The financial leverage was low with a D/E ratio of 0.34x and a D/A ratio of 0.20x. The book value of all operating projects was VND 8,538bn (or VND 18,175/share), accounting for 51.5% of total assets.
- KBC’s IP development business is likely to benefit from the expected continued solid foreign-direct-investment (FDI) inflows into Vietnam in coming years.
- Prospects for the company’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 strongly to meet the needs of the rapidly rising labor force.
- KBC is expected to achieve good selling progress in its IP business. We expect the company to exceed its own FY2019’s target, and growth should continue to be strong in 2020. In particular, we project the 2019 and the 2020 net profit to amount to VND 1,058bn (up by 41.5% yoy), and to VND 1,200bn (up by 13.5% yoy).
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