Vincom Retail JSC (HOSE: VRE) is one of the largest shopping mall developers in Vietnam, alongside competitors like Aeon and Lotte. The company has recently expanded its portfolio with the addition of three new shopping malls: Vincom Plaza Dien Bien Phu, Vincom Plaza Ha Giang, and Vincom Mega Mall Grand Park. With these new openings, VRE now operates a total of 86 malls across the country, spanning over 1.8 million square meters of floor space. The average occupancy rate for the second quarter of 2024 was impressive, at 83.9%, reflecting a 1.1% increase from the previous quarter.
VRE plans to open two more malls in the latter half of 2024, adding 27,600 square meters of floor space. (Image source: Vincom Retail)
In the latter half of 2024, VRE is set to introduce two more malls to its portfolio: Vincom Plaza Bac Giang and Vincom Plaza Dong Ha Quang Tri. These new additions will bring an extra 27,600 square meters of floor space. Despite this expansion, ACB Securities (ACBS) notes that the increased scale of operations has not significantly boosted VRE’s financial performance. In the second quarter of 2024, rental revenue experienced a slight dip of 0.2% year-on-year, amounting to VND 1,940 billion. This can be attributed to the minimal contribution from the three new malls during this quarter.
Moreover, the gross profit margin for rental operations decreased to 53.9%, a 3.9 percentage point decline from the second quarter of 2023. This decrease can be partly explained by elevated energy costs due to rising electricity prices and hot weather conditions.
On a positive note, VRE’s real estate transfer revenue witnessed a substantial year-on-year surge of 137%, reaching VND 467 billion. This growth was driven by a higher number of commercial townhouses delivered: 104 units in the Dong Ha Quang Tri project in Q2 2024 compared to 23 units in the Dien Bien Phu project in Q2 2023. However, the gross profit margin for this segment stood at 33.5%, significantly lower than the 45% achieved in Q2 2023 and ACBS’s projection of 44%.
Overall, in the second quarter of 2024, VRE posted revenue of VND 2,479 billion, reflecting a 14% year-on-year increase. Net profit after tax amounted to VND 1,021 billion, a modest 2% year-on-year growth. For the first six months of the year, VRE’s revenue reached VND 4,733 billion, a 15% year-on-year increase, while net profit after tax stood at VND 2,104 billion, up by 4% from the previous year. These results represent 50% and 48% completion of the full-year plans, respectively.
Looking ahead, VRE plans to open two more malls in the latter half of 2024: Vincom Plaza Bac Giang and Vincom Plaza Dong Ha Quang Tri, collectively adding 27,600 square meters of floor space. Meanwhile, the opening of Vincom Mega Mall Ocean City has been postponed from late 2024 to April 2025. This delay is attributed to the time required for post-Tet residential relocation to Vinhomes Ocean City and the lengthy process of economic demand assessment and permit acquisition for international tenants.
In April 2024, VRE announced the acquisition of three shophouse projects in Quang Ninh, Hai Phong, and Nha Trang from Vinhomes (VHM), Vingroup (VIC), and VinWonders Nha Trang, respectively. However, due to delays in the Nha Trang project, VRE decided to halt it and will receive a refund of VND 1,300 billion from VinWonders Nha Trang. The remaining two projects are on track, and VRE plans to introduce them in early 2025.
As of the end of the second quarter of 2024, VRE held over VND 16,100 billion in deposits for business and investment purposes, marking a 25% increase from the end of 2023. Notably, VND 13,800 billion of this amount was deposited with Vingroup and related parties, a 16% rise from the previous year-end.
Considering the challenges faced in the first half of 2024, including lower-than-expected rental revenue and gross profit margins, ACBS has adjusted its projections for VRE’s full-year performance. The total revenue estimate for 2024 has been reduced by 6% to approximately VND 9,100 billion, representing a 7% decrease from the previous year. Similarly, the net profit after tax is expected to decline by 10% to VND 4,200 billion, a 6% drop from the previous year. Despite these adjustments, ACBS maintains a high price target for VRE shares, expecting a significant increase of nearly 60% from the current market price by the end of 2024. This vote of confidence comes despite the stock’s downward trajectory since the shareholder changes, falling from the VND 27,000 range in March to its current level.
