LHG_NEUTRAL_TP 55700_Upsize 13_New Project - New Opportunity_BSC Company Update

VALUATION PERSPECTIVE

We recommend LHG stock at VND 55,700/SHARE upside 13.2%compared to the price on July 2,2021 with the RNAV method with a WACC capital usage cost of 12% for Project Long Hau 3.

BUSINESS RESULTS FORECAST

Net revenue and NPAT 2021 reached VND831 billion (+29% YoY) and VND282 billion (+42% YoY, respectively), completing 93% and 176% of plan in 2021, respectively. EPS fw = VND5,076 and P/E fw=9.7 - 5-year higher than LHG's 5-year avg. P/E at 5.7 and P/B fw =1. 8.

INVESTMENT THESIS

§  Industrial park - the main business segment with many potentials (1) 2021-2023: Long Hau Industrial Park 3 stage 1 (124ha) ensures a cagr profit growth rate of 26%; (2) 2024- 2030:  Long Hau 3 Industrial Park expansion (90ha) and An Dinh Industrial Park (200 ha).

§  Stable revenue from rental of existing factory and long-term potential from rental of factory area of 29ha in Da Nang High-tech Zone.

RISK

§   Covid-19 epidemic affects the plan for land transfer of industrial zones for lease and the schedule of revenue recognition.

§  Fulfilling the obligation to pay compensation costs of 280 houses at Long Hau Residential and resettlement project for Tan Thuan Co., Ltd.

BUSINESS UPDATES

§  Prudent business plan for 2021:  The company placed plan of revenue and NPAT of VND923 billion (+37% YoY) and VND160 billion (-20% YoY) on the complex fluctuations of the epidemic.