Company Quarterly Earnings Update – VGC VN – 2018 Q4

Summary of the 2018 results of Viglacera Corporation (VGC VN) 

2018 results: highlights
  • VGC’s net revenue declined by 2.3% yoy to VND 8,984bn in 2018, mainly due to lower revenue of the real estate segment (residential and industrial park (IP)). On the other hand, revenue of the building materials segment rose by 4.8% yoy.
  • The company’s gross margin declined to 22.4% from 23.3% in the previous year due to the lower gross margin of the building materials segment. The rising competition caused to company to lower its selling prices. But VGC managed to optimize its product mix, which helped at least to partly support the margin. As a result, net profit fell by 6.4% yoy to VND 561bn, mainly due to the rather slow delivery progress of IP land.
  • VGC had a total of VND 1,772bn of cash and cash equivalent, which accounted for 10.7% of total assets. Total debts were VND 2,110bn, resulting in a very low financial leverage with a D/E ratio of 0.13x and a D/E ratio of 0.31x.
Outlook
  • VGC’s building materials segment is supported by the solid development of the Vietnamese construction sector, which is likely to benefit from strong housing demand. The expected healthy housing demand is supported by the clear trend to urbanization and by the strong expansion of the middle-class population in Vietnam, which is expected to amount to 50% of the population by 2035, up from 13% in 2016 (according to the World Bank).
  • The IP development business and sanitary wares should be VGC’s two key growth drivers in the next two years. We expect that net profit will advance by 27.0% yoy in 2019 and increase by another healthy 16.9% in 2020.
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