Amata VN

Amata VN Plc 

 

We continue to be positive about the outlook for industrial parks in Vietnam, which is forecasting GDP growth of 5.5% in 1Q16. Promises by the new leaders to follow the same political and economic path have undergirded FDI prospects. Despite the fall YoY expected in 1Q16, we forecast strong profit growth in 2016-2017 with PER to plunge to 17.8x in 2016 and 9.9x in 2017 from 59.9x in 2015. Maintain BUY.   

 

Vietnam’s GDP growth put at 5.5% in 1Q16.

 

According to preliminary estimates by 

 

the General Statistics Office of Vietnam, GDP will grow a respectable 5.5% in 1Q16, though slowing from 6.1% in 1Q15 and 7.0% in 4Q15 due to unfavourable weather that hurt the agricultural sector and low oil prices. Vietnam targets GPD growth of 6.7% this year and inflation at no higher than 5%. Shoring up FDI confidence, the new leaders confirmed the economic path will continue as outlined, good news for demand outlook for industrial property and AMATAV.   

 

Land sales of 7.4ha (46 rai) in 1Q16; most buyers are Vietnamese and Korean investors in the garment/textile and machinery industries. This is 30% of our full year forecast of 25ha (156 rai). Adding this to the 5.8ha (36 rai) that was sold but not transferred last year, transfers are likely to reach 13.2ha (82.3 rai) or 50% of our full year forecast. 

 

1Q16F to weaken YoY, but grow QoQ. We estimate net profit of Bt40mn, -37% YoY but up QoQ from only Bt3mn in 4Q15. It will release results on May 11. 

 

The drop YoY is due to: a) lower real estate revenue on fewer deed transfers of 2.5ha (15 rai) in 1Q16 versus 6.0ha (27 rai) in 1Q15; and b) higher interest expense (Bt12mn in 1Q16 versus Bt1mn in 1Q15 generated by adding debt to acquire land  

 

The high growth QoQ comes from: a) improved gross margin to a more normal 60% versus only 42% in 4Q15 without the one-time development cost adjustment; b) the absence of provisions for doubtful debt (Bt16mn) and impairment of investment in Amata Power Bien Hoa (Bt20mn), in which it holds 10%; and c) no FX translation loss. 

 

IC granted for Amata City Service Township. AMATAV now has its investment certificate (IC) for 55.4ha (346 rai), which is ~45% of the Amata City Service Township project. On this land, AMATAV plans to develop residential and commercial areas as well as warehouses and a logistics system to support clients in nearby Amata City Hightech in Long Thanh. It plans to start construction in 2018 with completion in 2019, in line with our forecast. The IC for 753.1 ha (4.7K rai) in Amata City Mega Township is expected in 2Q16.   

 

Reiterate BUY with unchanged TP of Bt10.50. We maintain our 2016 net profit forecast of Bt475mn, rising to Bt858mn in 2017, up strongly from Bt121mn in 2015. At last close, this implies PER will be slashed from 59.9x in 2015 to 17.8x in 2016, then to 9.9x in 2017. Backed by a good industry outlook and strong earnings prospects, we maintain BUY.