Real estate giants boast lofty plans, is the market about to reverse?

Plan high

On May 31, DIC Corp (DIG) announced documents for the 2023 General Meeting of Shareholders. The company plans to achieve consolidated revenue of VND 4,000 billion in 2023, nearly double that of 2022. Consolidated pre-tax profit reached VND 1,400 billion, up 7 times.

The company chaired by Mr. Nguyen Thien Tuan said that since the second quarter of 2022, the real estate market has been sluggish due to the impact of the tightening credit policy. Bond capital and capital mobilized from customers are stuck. Some businesses are entangled in the law, causing the general sentiment in the market to be apprehensive. All transactions are delayed, and ongoing projects have had to press the "pause" button.

In 2023, according to DIG, there are still many difficulties forecast for real estate businesses. The journey to meet the conditions for land allocation, capital mobilization and sales is very arduous and time-consuming. Investors must have strong financial capacity and must spend a significant amount of money to be able to sell for reinvestment. Meanwhile, real estate purchasing power in 2023 is assessed to be very weak due to the impact of the economic recession.

However, from 2024, DIC Corp will prosper if it is able to remove obstacles and supplement revenue from projects such as: Vi Thanh - Hau Giang commercial residential area (1,000 billion VND), Nam Vinh Yen - Vinh Phuc new urban area (phase 1, more than 1,000 billion VND), Lam Ha Center Point residential area - Ha Nam (more than 1,000 billion VND), Ba Hang Lake eco-tourism and entertainment project (250 billion VND)....

DIG shares have increased sharply, about 2 times since the beginning of March until now, up to 21,350 VND/share. This stock has increased 7 in the last 10 sessions.

DIG started to stir after news that Vice Chairman Nguyen Hung Cuong - son of Chairman Nguyen Thien Tuan, bought 5 million shares at the end of March.

Since then, the company has received positive news such as a 30% increase in 2022 profit after audit; completion of the buyback of VND2,600 billion in bonds; at least 4 real estate projects will be accounted for in the near future. The management agency has taken many actions to remove difficulties for real estate projects.

Will the real estate market warm up in 2024? (Photo: NV)

Not only DIG, many other real estate stocks have also increased sharply recently.

In the trading session on May 31, TDH shares were pulled up to the ceiling price with a sudden matching volume of 1.8 million units after only 15 minutes. This was the 7th consecutive increase of Nha Thu Duc shares, thereby helping this stock increase nearly 1.5 times since May 23.

Quoc Cuong Gia Lai ’s QCG shares also increased strongly for the fourth consecutive day, pushing the market price up to VND6,640. In May, this stock increased by 65%.

Meanwhile, another real estate code, PXL of Long Son Petroleum Industrial Park Investment and Development Corporation (UPCoM), increased by 75% within 1 month.

Many other real estate codes have skyrocketed recently such as: CRE, VPH, LDG, DXS, CII, PDR...

KBC industrial real estate stocks also increased sharply. This company has money and wanted to buy back previously issued corporate bonds before maturity but failed. Mr. Dang Thanh Tam's KBC was only able to buy half of the bonds offered for early repurchase because bondholders did not agree to sell them back.

Not just pink

Real estate stocks are heating up as businesses receive many positive policy signals. However, not everyone is optimistic.

During this year's General Meeting of Shareholders season, many real estate businesses no longer paint rosy business plans to shareholders. Market difficulties remain. The priority plan is risk management and restructuring. Most businesses set profit plans to decrease by several dozen percent compared to 2022 such as: TTC Land, Ha Do...

On May 31, No Va - Novaland Real Estate Investment Group (NVL), chaired by Mr. Bui Thanh Nhon, announced documents for the 2023 Annual General Meeting of Shareholders to be held on June 22. In particular, Novaland plans to reduce after-tax profit by more than 90% compared to 2022 to VND 214 billion. Revenue decreases by 14.5% to VND 9,531 billion and will not pay dividends from 2021 to 2023.

In the first quarter of 2023, Novaland recorded revenue of just over VND600 billion (down 70% year-on-year and down 81% compared to the fourth quarter of 2022). This is the lowest quarterly level since going public at the end of 2016.

NVL reported a loss of VND410 billion - the first quarter of loss since being listed on the stock exchange. With this result, Novaland completed more than 6% of its revenue target and is far from its profit target of over VND200 billion in 2023.

On the stock exchange, NVL shares have been moving sideways since the beginning of the year, currently at VND13,500/share.

For DIG, the 2023 plan is very high but compared to the low base of 2022. Last year, DIG only completed 10.5% of the profit plan (reaching nearly 199 billion VND, down 85% over the same period) and could not raise capital.

DIC Corp planned to raise VND5,693.9 billion but in reality, it did not raise any VND. Of which, the plan to issue VND3,000 billion (adjusted down to VND1,500 billion) to existing shareholders was canceled; the plan to issue VND2,500 billion in bonds has not been implemented yet. The capital mobilization limit is VND1,693.9 billion but has not been implemented.

Assessing the outlook, SSI Securities believes that the worst may have passed for the real estate industry. However, this securities company only has a neutral recommendation for this industry.

According to SSI, in the context of interest rates decreasing earlier than expected and receiving more active support from the Government, the real estate market is improving, but there may still be certain obstacles. Lending interest rates still need to be reduced further to stimulate demand again.

Besides, support policies need time to really impact the market, especially to remove bottlenecks in the project licensing process.

Furthermore, according to SSI, the risk of default can still occur with investors who cannot negotiate with bondholders to extend payment terms or balance cash flow to repay debt.

Investors who are less affected by bond issues, own good land funds and have the ability to develop and sell will overcome the "headwinds" ahead and benefit from support policies.

Among them, there are some enterprises focusing on the low-end and mid-range segments, managing finances prudently. Some enterprises developing industrial park projects benefit from sustainable FDI flows and enterprises with retail real estate, improving in the post-Covid period.

The Minister of Construction was asked to work directly with Mr. Bui Thanh Nhon. The Prime Minister asked Minister of Construction Nguyen Thanh Nghi to work directly with Mr. Bui Thanh Nhon, Chairman of Novaland Group, to remove obstacles for the project in Dong Nai.

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