Cautiousness persists in real estate stock prices

VIETNAM, September 15 – HÀ NỘI — Although the valuation of the real estate sector and equities is reduced to a low level, Agriseco still takes a cautious view of the sector due to a lack of near-term dynamism.

Real estate stock prices need to lose another 10-20% to create more opportunities for bargain-hunting activity.

In the property sector update, Agribank Securities (Agriseco) said current property stock prices are trading around the price-to-book (P/B) ratio of around 2.5x, below the average for last 3 years. .

After peaking in April, corresponding to a P/B of around 3.5x, real estate stock prices fell 30-50% and created a short-term floor at the P/E of 2.25x.

The securities firm said that in 2018-19, when credit flows into the real estate sector were brought under control, industry stock prices corrected and bottomed at the P/B of 2x.

Therefore, Agriseco Research expects the P/B of around 2x – 2.25x to be the low end of this period and is an appropriate price range for investors to consider shelling out budgets for their medium-term investments. and long term.

“Typically, real estate stock prices still need to decline another 10-20% to create opportunities for bargain-hunting activity,” the company said.

Agriseco’s statistics of 65 residential real estate companies across the three exchanges, excluding Vingroup (VIC) as Vinhomes (VHM) were already counted, total turnover and profit after tax in the first six months for the year were VNĐ51.22 trillion (US$2.17 billion) and VNĐ11.65 trillion, respectively, down 40% and 50% year-on-year.

The decline is mainly explained by the less positive results of the main companies in the sector. However, Agriseco noted that quarterly earnings may not fully reflect the situation for real estate businesses, as earnings postings occur when proceeds are handed over, typically in the second half of the year.

For the first six months of the year, the total profit before interest and tax (EBIT) of real estate companies reached 6,250,000,000,000,000, a slight decrease compared to the same period last year.

Even though many companies experienced unexpected profit growth, the main contribution did not come from core business activities, but from financial divestment or revaluation of assets such as Hoàng Quân Consulting-Trading-Service Real Estate Corporation ( HQC), An Dương Thảo Điền JSC (HAR), and Sông Đà Corporation (SJG). These amounts are considered one-time and are likely to act as a barrier to future earnings growth.

According to Agriseco Research, the level of financial leverage at the end of June has increased considerably compared to the beginning of the year. The debt ratio of real estate companies fell from 47% as of December 31, 2021 to 57% as of June 30, which is equivalent to the level recorded during the COVID-19 pandemic. The debts of 65 residential real estate companies (excluding Vingroup) are estimated at more than 186 trillion VN, a gain of 25% compared to the end of last year.

The securities firm said amid the declining corporate bond market and shrinking real estate line of credit, smaller companies with less land will face many challenges in raising capital. as well as cash flow risks.

Currently, listed real estate companies mobilize loans in four main forms – bank credit, corporate bond issuance, prepaid customers and other sources of capital with proportions of 14%, 17%, 18% and 51%, respectively, according to the estimate of FiinGroup.

Among these, many companies have a high proportion of bond debt in their debt structure of more than 50%, such as An Dương Thảo Điền, VRC Real Estate and Investment (VRC) and Phát Đạt Real Estate Development JSC.

Interest rates are also showing signs of rising after two years at a record low. As a capital-intensive industry with a high debt-to-equity ratio, the real estate industry could be negatively affected when project implementation progress and sales slow down, Agriseco said.

He also said that since credit for the real estate sector is tightly controlled and corporate bond raising is quiet ahead of the amended Executive Order 153, real estate companies in poor financial health will find it difficult to raise capital for restructure the debt due. VNS

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