The securities company has assessed the prospects of the real estate group in 2024. Accordingly, the analysis team recommends investing in 3 stocks, of which 1 code can increase to 38%. Real estate industry outlook in 2024
According to Agriseco Research, the real estate market will still be difficult in 2024 and will start to improve from the second half of 2024 when the Legal - Capital - Liquidity bottlenecks are gradually removed (1) Credit capital for home loans will grow again; (2) The Laws: Law on Real Estate Business, Housing Law and Land Law (amended) will take effect from the beginning of 2025; (3) The number of home purchase transactions and house selling/rental prices are expected to continue to increase every quarter and be higher than the same period.
Sales will improve in 2024 and 2025 thanks to (1) Most real estate projects being handed over in the next 2 years; (2) The economy gradually recovering along with the recovery of investor spending as policies to remove difficulties gradually permeate. However, business results in 2024 may not grow dramatically due to the slow progress and absorption capacity of the economy. This is a pivotal year for the recovery process of the entire industry.
The analysis team believes that the recovery prospects will be differentiated. The apartment segments with real demand around the inner city or on the outskirts of the city center with good locations and developed infrastructure will recover sooner due to the still high demand. The villa and resort segments will still face difficulties next year.
Difficult factors
Real estate consumer demand is recovering but still slower than expected: According to data from the State Bank of Vietnam, outstanding credit for real estate consumption (loans for individuals buying houses) is decreasing in both scale and proportion. One of the main reasons is that home buyers are still concerned about legal policies and apartment prices that are too high compared to their financial capacity.
The pressure to pay maturing bonds remains high, the bad debt ratio of banks tends to increase: The value of bonds maturing in 2024 is estimated at about 330 trillion VND. The scale of maturing bonds is about 20% higher than in 2023 and is concentrated in the second half of 2024. Meanwhile, in 2023, the number of real estate enterprises that are late in paying principal and interest on bonds increased (estimated from 21 enterprises in the first quarter of 2023 to 100 enterprises in the fourth quarter of 2023). In addition, the bad debt ratio of the real estate sector is increasing compared to the end of 2022 (as of December 31, 2022, it was 1,72%, but by September 2023, it was 2,89%), reflecting the actual difficulties of real estate enterprises in lacking capital to pay debts and implement projects.
Real estate group valuation
The average valuation of the real estate group is trading at a P/B of 1.3x compared to the average of 8.1x over the past 10 years. The decrease in valuation mainly comes from the sharp decline in the fourth quarter of 2020 and stock prices have not recovered to the previous price range. However, this does not imply that the real estate stock price level is in an attractive area when most of them have increased in price since the beginning of the year while business results have decreased and the industry context is still very difficult.
On the positive side, there are still some stocks of enterprises with good land funds and project implementation capacity that are at suitable valuation levels, which is an opportunity for investors to consider choosing to disburse and hold in the medium and long term.
Therefore, AGR (HM:AGR) raised its view from Cautious to Neutral on the real estate sector. Investors should consider evaluating and selecting real estate stocks with large land funds in the handover stage; focusing on affordable and mid-range housing segments in the inner city and on the outskirts of the city; good sales and turnover capacity; and maintaining their position in the context of economic downturn and real estate difficulties.
Panning for gold, 3 potential real estate codes in 2024
For the potential portfolio in 2024, Agriseco Research selected 3 businesses with the following criteria:
– Healthy and safe financial situation;
– Own projects with favorable locations that benefit from public investment;
– Good and proven project implementation capabilities in the past;
– Most projects have paid land use fees and completed financial obligations, avoiding the risk of increased investment costs when land price policies change according to the market;
– Has a suitable and attractive valuation compared to the potential for future business growth.
Nam Long (NLG (HM:NLG)): Target price: 40,000 VND/share (+9%)
Nam Long is a real estate company with a quality project portfolio with a total land fund of 685 hectares. NLG's projects are all in prime locations in the suburban provinces that are currently attracting investment such as Binh Chanh, Thu Duc (HCMC), Long An, Can Tho, Dong Nai and Hai Phong.
Business results outlook for 2024: NLG's revenue and profit are expected to be contributed by the projects launched for sale including: South Gate, Mizuki Park 2&3, Akari City, Ehomes Can Tho. Profit after tax in 2024 is expected to increase thanks to financial interest from the joint venture when recording revenue from selling the Mizuki project and handing over 25% of the Paragon project to a Japanese partner.
Medium and long-term development potential: NLG has a large land fund of nearly 700 hectares, mainly located in potential provinces of Ho Chi Minh City, Dong Nai, Long An, Hai Phong with key development plans (special mechanism of Can Tho, Long Thanh expressway). Most of the projects have legal status, are under construction and are preparing to open for sale in the next 2-3 years, which will help maintain sustainable growth.
Vinhomes (HM:VHM): Target price: 60,000 VND/share (+38%)
VHM has the largest land fund among listed real estate companies today with a total land area of nearly 17,000 hectares stretching from North to South. VHM has great potential for long-term growth with healthy finances, potential land fund location and great position in the industry.
Business outlook: 2024 business results may slow down as sales slow down. Unrecognized sales as of September 30, 2023 were VND76,900 billion (down VND381 billion yoy), of which VND651 billion from Ocean Park 2.3 wholesale and most of which will be recorded in 2024. This may affect business results in the coming time as the real estate market continues to be difficult. However, AGR expects the business situation to gradually improve thanks to the opening of additional projects in Bac Giang, Hai Phong and three social housing projects in the next two years.
Long-term potential thanks to leading position: Vinhomes projects are all conveniently located in areas with many key infrastructure projects. Therefore, VHM products often attract great attention from customers. Agriseco Research expects that the implementation of Vinhomes Sky Park, Golden Avenue, and Vu Yen projects will create cash flow for the business in the period of 2024-2025. At the same time, VHM will focus on promoting the development of 3 social housing projects in Thanh Hoa, Hai Phong, and Quang Tri at the end of the year, which will support VHM's sales in the coming time.
Attractive valuation: VHM is trading at a historical low P/B of 1.0x. This could be a good time to invest in a mid-term holding with a leading stock and long-term growth potential.
VHM, KDH, NLG – 3 potential real estate stocks
Khang Dien House (HM:KDH): Target price 37,000 VND/share (+17%)
Khang Dien House is one of the investors in mid-range and high-end residential real estate with a land fund of more than 600 hectares in Ho Chi Minh City. Real estate projects are located in locations with long-term development potential such as Thu Duc area, Southwest of the city.
Business outlook 2023 and 2024: In 2023, AGR forecasts net profit to decrease compared to the same period due to no longer recording profits from revaluation.
However, in 2024, the analysis team believes that KDH's revenue will grow positively compared to 2023 thanks to the expectation of increased sales at the new projects Privia and Clarita. At the beginning of the fourth quarter, the Privia project received a license to approve the sale of future housing of 1,043 apartments and with its favorable location, the project received a lot of attention.
Long-term growth potential thanks to land fund expansion strategy: KDH is focusing on expanding its land fund by more than 500 hectares in Ho Chi Minh City with many potential projects such as Clarita, Emeria, The Solina, Tan Tao Residential Area, Le Minh Xuan Industrial Park, Binh Trung Industrial Park, Phong Phu 2. The above projects are expected to help KDH expand its land fund to ensure business operations in the coming years.
