Profits for industrial park investment firms might increase by over 50% in the second half of 2022

DNHN - According to SSI Research, earnings of industrial park investment corporations might climb by about 50% in the second half of 2022 as a result of increased demand for industrial land, which is predicted to increase by an average of 8-20% over the same time, depending on the location.

According to the newly updated research, the analysis section of SSI Securities Company (SSI Research) anticipates the profit after tax of the Industrial Park Real Estate business to increase by 47.3% over the same period in the second half of 2022. This is due to increased industrial land demand, which is predicted to improve as the economy recovers, and rents, which are expected to rise by an average of 8-20% over the same time, depending on the location.

In such a case, the profit after tax of Industrial Development and Investment Corporation - JSC (stock code: BCM) is predicted to rise by 239% over the same period, owing primarily to the transfer of 18.9 hectares of commercial land in Binh Duong city-new town for CaptaLand. IDICO Corporation - JSC (stock code: IDC) expects its profit after tax to climb by 266% over the same period last year, owing to a change in accounting technique from equal recognition to one-time recognition in Phu My Expanded Industrial Park and a new lease in Huu Thanh Industrial Park. If the sale of 30 hectares in Trang Cat Urban Area goes well, Kinh Bac Urban's net profit (stock code: KBC) in the last six months of 2022 is predicted to triple.

Also, SSI Research thinks that the trend of moving production from China to Vietnam will continue in 2023, which will be good for the demand for industrial park land rentals. Also, policies meant to attract foreign direct investment (FDI) encourage investors to come back and invest in Vietnam. These policies include preferential policies like no corporate income tax for the first four years of operation, a 50% reduction in corporate income tax for the next five years, and many other incentives.

In the future, projects like Ring Road 3 and Ring Road 4, the Expressway Bien Hoa–Vung Tau, the Road Dau Giay–Phan Thiet, the North-South Expressway, Cai Port Thi Vai Mep, and Gemalink Port will make it easier for IPs to connect.

By 2023, the net profit of listed industrial park developers is expected to grow by about 18% over the same time when the total area of leased land grows by 10% per year. Also, land rent is expected to go up by 8% in the IPs of Southern Vietnam and by 6% in the IPs of Northern Vietnam by 2023.

KBC's NPAT is estimated to be VND 3,700 billion, which is a 25% increase over the same period. This is because current projects are still the main source of income, but phase 3 of the Trang Due Industrial Park project and IPs in Long An can also start bringing in money. IDC's net profit is estimated to be 2.2 trillion dongs, which is up 24% year over year. This is mostly because profits from industrial zones are being counted.

But SSI Research also talked about the risks that come with the fact that industrial centres like Binh Duong, Dong Nai, and Bac Ninh are all over 80% full. The time it takes to get paid for clearing a site is slow. This means that there isn't much land in the remaining IPs, which makes it hard to rent out large areas.

SSI is optimistic about BCM's future business results, especially for Industrial Development and Investment Corporation - JSC (stock code: BCM), which is the leader in the field of industrial park development and has 454.3 hectares of land left to lease. At the same time, thanks to the commercial land area of up to 1,250 ha in Binh Duong New City and the residential areas of Bau Bang and My Phuoc, the liquidity of their businesses is improved and their profit margins are kept at a higher level of 43% from 2022 when the new land price bracket in Binh Duong for the period 2020-2024 is used.

Also, the joint venture between VSIP and Warburg Pincus is expected to make money once the demand for land and factories picks up again in 2022.

As for IDICO Corporation – JSC (stock code: IDC), SSI assumes that the rent in Huu Thanh Industrial Park will go up to 130 USD/m2/lease period in 2021 and Phu My II to 125 USD/m2/cycle lease period. A newly planned industrial park and 90 hectares of residential land were also added to the valuation model. Positive evaluations say that IDC is one of the biggest developers of industrial parks in Vietnam. It has 875 hectares of land, of which 367.8 hectares have been turned into ready-to-rent infrastructure, mostly in Long An, Ba Ria Vung Tau, and Thai Binh. At the same time, Huu Thanh Industrial Park will be the main driver of IDC's growth over the next 3–5 years. IDC also wants to build up a land bank of 2,000 ha to 3,000 ha in provinces like Tien Giang, Hai Phong, Hung Yen, etc. From 2024 on, SSI Research is expected to add to this land fund and lease it out.

PV