Amata VN

Amata VN Plc   

 

We continue to like AMATAV. It has a positive business environment, stable government and clear policies. Vietnam’s economy is expected to continue to grow strongly, outpacing global growth this year. This will translate into strong demand for industrial properties, underwriting our strong land sales forecast and earnings growth outlook. BUY. 

 

Positive environment. According to its General Statistical Office (GSO), Vietnam had outstanding economic growth of 6.7% in 2015, the best since 2008 and beating the government’s expectation of 6.2% thanks to strong growth in industrial production (+9.6% YoY). Inflation hovers around a historically low level of 0.6%. The government expects sustainable economic growth of ~6.7% in 2016, backed by growing local demand and surging foreign direct investment. The reelection of Nguyen Phu Trong as General Secretary of Vietnam’s Communist Party keeps him at the helm until 2020, providing reassurance of continued economic reform and infrastructure upgrade – and thus continued flood of FDI into Vietnam and solid demand for industrial properties. 

 

2015 operational wrap-up. AMATAV sold 18.9ha (~118 rai) in industrial park (IP) land, up from 6.7ha (~42 rai) in 2014, though slightly below target of 20ha (125 rai). It transferred 13.1ha (~82 rai), leaving 5.8ha (36 rai) as backlog; the client is applying for its Investment Certificate (IC). It sold ~5K sqm in ready-built factories (RBF).   

 

Strong 4Q15F. We estimate net profit of Bt120mn in 4Q15, strong growth from Bt47mn in 4Q14 and Bt10mn in 3Q15 on higher land transfers and RBF sales. This would bring full year profit to Bt238mn, very strong growth from Bt124mn in 2014 – though ~35% below our forecast because of transfer delays to 2016. Result is on February 16. 

 

2016 targets unchanged. AMATAV keeps unchanged its 2016 sales target of 25ha (~156 rai) in Bien Hoa’s IP, of which 5.4ha (~34 rai) is expected in 1Q16. This includes 2.0ha (~13 rai) already sold and a probable additional 3.4ha (~21 rai). It is negotiating for sale of another 30ha (~187 rai) and will conclude the deal by May. It expects to sell 1.3ha (~8 rai) of its commercial complex, with 0.7ha (~4.4 rai) expected to go to a Japanese hotel developer and 0.4ha (~2.5 rai) to retail clients. It says there is very strong demand for RBF, with 85% of the space under construction (20K sqm) already booked. We maintain our forecast at 79% CAGR from 2014 to 2017F. 

 

Land acquisition update. Dong Nai Peoples Committee has signed an agreement for legal action for 5ha (~31 rai) land expropriation for the entrance of Amata City Bien Hoa’s new phases: 3A with sellable area of 49ha (~306 rai) and 3B with 16ha (100 rai), for which IC permit is in process. It expects to start construction of the access road by April at the latest; it will take 4-5 months to level the land, which will allow clients access and allow them to begin factory construction concurrently with AMATAV’s infrastructure development. It has a back-up plan to build a temporary access road to the site to make sure the development for 3A will finish by the end of this year. The land development for phases 3A and 3B should be smooth as there are no residents in the area, except for 5ha (~31 rai) at the entrance. Land acquisition for Amata City High Tech in Long Thanh is progressing, with 50-60% of the permitted land acquired and no cost overruns.