Ba Ria - Vung Tau Housing Development, Construction Investment Development, Khang Dien Housing Trading and Investment, Nam Long Investment

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Dissertation submitted in partial fulfillment of the

Requirement for the MSc in Finance

FINANCE DISSERTATION ON

COMPANY ANALYSIS REPORT OF

Ba Ria - Vung Tau Housing Development,

Construction Investment Development, Khang Dien

Housing Trading and Investment, Nam Long Investment

NGUYEN THUY LINH

ID No: 21071801

Intake 5

Supervisor: Dr. Nguyen Xuan Quang

September 2022

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ACKNOWLEDGEMENTS

During my time studying in the Master of Science in Finance program, I was

equipped with academic knowledge by Doctors and Professionals. Through this 1-year

course, I have learned a lot through subjects such as Fundamental of Finance, Financial

Instruments and many other subjects. Through this, I would also like to thank the

teachers especially Dr. Nguyen Xuan Quang – my supervisor for promptly giving me a

lot of advice and knowledge as well as practical stories of businesses for me to complete

this dissertation.

I would like to give a special thank you to the University of the West of England

and Banking Academy for giving me the opportunity to spend 2 weeks in the United

Kingdom to better understand the culture and history of this beautiful country.

Throughout the trip, I have absorbed the knowledge by funny teachers.

This thank you I would also like to send to my parents, who have always been by

my side and supported me not only during my master's studies but also my whole life.

Perhaps the last thank you I would like to send to my friend Ngo Thi Phuong Anh who

is always by my side to share difficulties with me, helps me to have more motivations

to complete this dissertation.

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TABLE OF CONTENTS

ACKNOWLEDGEMENTS ................................................................................2

TABLE OF CONTENTS ....................................................................................3

LIST OF TABLES AND FIGURES...................................................................6

CHAPTER 1: INTRODUCTION .....................................................................10

1.1 Overview of real estate industry in the global and Vietnam ................10

1.2 Area of study.........................................................................................12

1.3 Study objectives....................................................................................13

1.4 Methodology.........................................................................................14

CHAPTER 2: MACROECONOMIC ANALYSIS...........................................16

2.1 World economic outlook..........................................................................16

2.1.1 PEST analysis....................................................................................17

2.2 Regional economic outlook .....................................................................18

2.2.1 PEST analysis....................................................................................19

2.2.2 Key economic factors analysis..........................................................22

2.3 Vietnam economy ....................................................................................25

2.3.1 PEST analysis....................................................................................27

2.3.2 Key economic factors analysis..........................................................29

CHAPTER 3: INDUSTRY ANALYSIS...........................................................32

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3.1 Global industry.........................................................................................32

3.2 Regional industry .....................................................................................33

3.3 Vietnam industry......................................................................................33

3.3.1 Rivalry among existing firms............................................................35

3.3.2 Threat of New Entrants......................................................................35

3.3.3 Power of Suppliers.............................................................................36

3.3.4 Power of Customers...........................................................................37

3.3.5 Threat of Substitutes..........................................................................38

CHAPTER 4: COMPANY ANALYSIS...........................................................39

4.1 Ba Ria - Vung Tau Housing Development JSC (HDC) ..........................39

4.1.1 Business description ..........................................................................40

4.1.2 SWOT analysis..................................................................................43

4.1.3 Financial ratios ..................................................................................47

4.1.4 Valuation model ................................................................................50

4.2 Construction Investment Development Joint Stock Corporation (DIG) .55

4.2.1 Business description ..........................................................................57

4.2.2 SWOT analysis..................................................................................58

4.2.3 Financial ratios ..................................................................................61

4.2.4 Valuation model ................................................................................64

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4.3 Khang Dien Housing Trading and Investment Joint Stock Company (KDH)

...................................................................................................................................69

4.3.1 Business description ..........................................................................73

4.3.2 SWOT analysis..................................................................................74

4.3.3 Financial ratios ..................................................................................77

4.3.4 Valuation model ................................................................................80

4.4 Nam Long Investment Joint Stock Company (NLG) ..............................85

4.4.1 Business description ..........................................................................87

4.4.2 SWOT analysis..................................................................................90

4.4.3 Financial ratios ..................................................................................93

4.4.5 Valuation model ................................................................................96

CHAPTER 5: CONCLUSION........................................................................102

REFERENCES................................................................................................104

APPENDIX .....................................................................................................104

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LIST OF TABLES AND FIGURES

List of tables

Table 1 Real GDP growth in ASEAN, China and India, 2020-2023................22

Table 2 Tear sheet .............................................................................................39

Table 3 HDC valuation P/E method..................................................................50

Table 4 HDC valuation P/B method..................................................................51

Table 5 HDC valuation EV/EBITDA method ..................................................52

Table 6 HDC Average valuation method ..........................................................53

Table 7 HDC compared to industry average .....................................................54

Table 8 Tear sheet .............................................................................................55

Table 9 DIG valuation P/E method ...................................................................64

Table 10 DIG valuation P/B method.................................................................65

Table 11 DIG valuation EV/EBITDA method..................................................66

Table 12 DIG Average valuation method .........................................................69

Table 13 DIG compared to industry average ....................................................69

Table 14 Tear sheet ...........................................................................................69

Table 15 KDH valuation P/E method................................................................80

Table 16 KDH valuation P/B method ...............................................................81

Table 17 KDH valuation EV/EBITDA method ................................................83

Table 18 KDH Average valuation method........................................................84

Table 19 KDH compared to industry average...................................................85

Table 20 Tear sheet ...........................................................................................85

Table 21 NLG’s business 2021 .........................................................................88

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Table 22 NLG valuation P/E method ................................................................96

Table 23 NLG valuation P/B method................................................................97

Table 24 NLG valuation EV/EBITDA method.................................................99

Table 25 NLG Average valuation method ......................................................100

Table 26 NLG compared to industry average .................................................101

Table 27 Profitability efficiency HDC............................................................164

Table 28 Profitability efficiency DIG .............................................................164

Table 29 Profitability efficiency KDH............................................................165

Table 30 Profitability efficiency NLG ............................................................165

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List of Figures

Figure 1 Inflation Risk ......................................................................................24

Figure 2 Starting Point ......................................................................................25

Figure 3 GDP growth 2019 – 2022 ...................................................................30

Figure 4 The map below shows the location of HDC's major projects.............41

Figure 5 Profitability ratio 2017 – 2021............................................................47

Figure 6 Gearing ratio 2017 - 2021...................................................................48

Figure 7 Liquidity ratio 2017 - 2021.................................................................49

Figure 8 Efficiency ratio 2017 – 2021...............................................................49

Figure 9 Profitability ratio 2017 - 2021.............................................................61

Figure 10 Gearing ratio 2017 – 2021 ................................................................62

Figure 11 Liquidity ratio 2017 – 2021 ..............................................................63

Figure 12 Efficiency ratio 2017 – 2021.............................................................63

Figure 13 Map of key projects of Khang Dien..................................................74

Figure 14 Profitability ratio 2017 – 2021..........................................................77

Figure 15 Gearing ratio 2017 – 2021 ................................................................78

Figure 16 Liquidity ratio 2017 – 2021 ..............................................................79

Figure 17 Efficiency ratio 2017 – 2021.............................................................80

Figure 18 Map of southern key projects of Nam Long .....................................87

Figure 19 Contract value 2021-2024 (million VND)........................................90

Figure 20 Profitability ratio 2017 – 2021..........................................................93

Figure 21 Gearing ratio 2017 – 2021 ................................................................94

Figure 22 Liquidity ratio 2017 – 2021 ..............................................................95

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Figure 23 Efficiency ratio 2017 – 2021.............................................................95

Figure 24 Industrial production 2021 – 2022..................................................149

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CHAPTER 1: INTRODUCTION

1.1Overview of the global and Vietnamese real estate industry

Real estate is an industry that plays a very important role in the economy, is a

contributing factor to promoting investment capital mobilization, promoting production

and development, increasing state budget revenue, expanding markets, and contributing

to socio-economic stability. The real estate industry not only contributes significantly to

a country's GDP but also promotes other industries to develop such as construction

materials, finance or labour, solving the problem of unemployment. Because of its

importance, the government always has appropriate mechanisms and policies so that the

real estate market can develop stronger and healthier.

The Vietnam Real Estate Association recently released a study showing that the

contribution of the real estate market in GDP in the period 2019-2021 is about 14%. The

real estate market can spread to over 40 other important sectors of the economy and

become a bridge for other markets, contributing to the synchronous development of all

types of markets. When the final demand for the real estate industry increases by VND

1,000 billion, it will stimulate the production value of the remaining industries to VND

772 billion and spread to an additional value of VND 191 billion.

The research report of the Real Estate Association: "In case the production value

of the real estate industry group changes by 10%, GDP will decrease by 1,247%; the

processing and manufacturing industry was the most affected, down 0.861%. This was

followed by agriculture, forestry and fisheries (down 0.366%); tourism (down 0.352%);

other services (down 0.348%)".

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In addition, quantifying the scale of real estate assets can be seen that in 2020

alone, the proportion of real estate / total assets of the whole economy accounts for

20.8% (205.26 billion USD / 986.82 billion USD); in 2025 it is 21.2% ($462.7

billion/$2183.09 billion) and it is estimated that by 2030 it will be 22.0% ($1232.29

billion/$5601.31 billion).

If the year 2020, the added value of real estate industries is estimated at VND

484.9 trillion (USD 20.89 billion), accounting for 7.7% of GDP, by 2025 it is estimated

at VND 1,249.8 trillion (USD 53.84 billion), accounting for 9.72% of GDP; in 2030, it

is estimated at VND 3,428.7 trillion (US$147.71 billion), accounting for 13.6% of GDP

(Hang, 2022).

In 2020 – 2021, the world economy was heavily affected by the COVID-19

epidemic and the real estate industry is no exception. In general, the country's market in

all sectors is quiet and quite gloomy due to prolonged social distancing activities.

Particularly, the real estate market also recorded many sharp declines in many

indicators. The picture of Vietnam's real estate market in these years is also quite dark

due to impossible transactions, a sharp decline in supply, and an increase in inventories.

However, if it is said that in 2021, Vietnam's real estate market is not positive, it

is not true because besides the difficulties and challenges of the epidemic in 2020, at the

beginning of 2021, the real estate market has many strong marks, quite optimistic.

Specifically, right from the beginning of 2021, the market received a series of land fevers

on a large scale, from big cities such as Hanoi, and Ho Chi Minh City to provinces such

as Quang Ninh, Bac Giang, Thanh Hoa, Binh Phuoc, Dong Nai ... There are places where

land prices doubled in just a few months. Along with land fever nationwide, 2021 is also

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a year that has witnessed an unprecedented increase in the number of real estate investors

participating in the market, proportional to the number of investors participating in the

stock market. As a result, there have been many real estate brokers, stockbrokers and

new accounts opened at securities companies (Thuong, 2022).

The year 2021 is also the year when the shares of real estate companies have

achieved quite deep marks with strong growth thanks to the land fund of owned

enterprises, the government's public investment cash flow makes not only real estate but

also real estate companies' shares very hot during this time. As a result, the revenue of

real estate companies has increased quite impressively this year through the sale of

apartments and projects and receiving huge profits from securities investment or huge

capital mobilization from bond issuance.

1.2Area of study

Along with the craze of the real estate industry in the past year, the dissertation

will go into the analysis of 4 real estate companies that are said to be outstanding and

have quite impressive growth in the past year: Ba Ria - Vung Tau Housing Development

JSC (HDC), Construction Investment Development Joint Stock Corporation (DIG),

Khang Dien Housing Trading and Investment Joint Stock Company (KDH), Nam Long

Investment Joint Stock Company (NLG). In the past year Construction Investment

Development Joint Stock Corporation (DIG) has emerged as a company with a huge

land bank and skyrocketing stock price. According to analysis reports with such a huge

land fund, DIG's share price can reach a valuation of 500,000VND per share. In fact, in

January of 2021, the price of DIG shares fell to about 21,000VND per share, but after a

year also in January 2022, the price of DIG shares reached 102,000 VND per share. This

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impressive increase took place when DIG's land bank was reported on the pages of

newspapers. During that time, DIG rose strongly from a low-cap company to the

industry's leading leader in the stock market (Café f, 2021). Ba Ria - Vung Tau Housing

Development JSC (HDC) also has an impressive growth, joining stocks worth VND

100,000 per share. In the first months of 2020, HDC shares are worth around

10,000VND per share, but after 2 years the value of HDC shares has reached nearly

100,000 VNDD per share through the information that HDC will make huge profits from

two big projects, The Light City and Ngoc Tuoc 2 (Café f, 2021). Changing to strong

small stocks, Khang Dien Housing Trading and Investment Joint Stock Company

(KDH) or Nam Long Investment Joint Stock Company (NLG) are real estate companies

evaluated by securities companies as quite large also had impressive momentum when

KDH reported a profit of nearly 500% VND in 2021, the stock peaked of KDH after 11

years or NLG is a company famous for its clean land fund, the project is located in prime

locations, so this stock has never ceased to be prestigious with both individual,

institutional or foreign investors who want to own it (Café f, 2022). NLG through

valuation methods, the stock price does not go up according to the news but up according

to the capacity of the enterprise, so owning an NLG stock, investors can completely trust

the value of the stock.

1.3Study objectives

Through the analysis of the dissertation, readers can get the most general view of

the real estate industry and can make for themselves investment decisions suitable for

prominent companies in the industry through valuation methods and other analysis.

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Readers also take the comparison between valuation method and based on

recommendation to evaluate the stock which will be bought or is held.

1.4Methodology

The dissertation uses the method of analysis from general to specific, from macro

to industry analysis, then to the situation of each specific enterprise and finally the

conclusion, making recommendations on whether to invest in the enterprise or not.

Part 1: An overview of the World Economy goes into factors in PEST analysis

to be able to see how those factors affect the World Economy. Analysis of macro issues

in the region. Vietnam is located in Southeast Asia, so it will also be influenced by the

elements of the ASEAN polar region. We will realize this through PEST analysis and

Key economic factors such as GDP growth or Inflation rate. After going through the

international macro situation, the region will be Vietnam’s economic outlook. In this

section, Vietnam's situation in terms of political, social, economic or technological years

will be analyzed through PEST. Then the Key Economic Factors will also clarify

Vietnam's picture of GDP growth, Inflation rate, Interest rate or Industrial Production.

Part 2: Industry analysis will give a better view of the real estate industry in the

world, in the region, specifically the ASEAN region and the 5 forces model will clarify

more about the real estate industry in Vietnam.

Part 3: Company analysis will analyze 4 prominent companies in the real estate

industry including: Ba Ria - Vung Tau Housing Development JSC (HDC), Construction

Investment Development Joint Stock Corporation (DIG), Khang Dien Housing Trading

and Investment Joint Stock Company (KDH), Nam Long Investment Joint Stock

Company (NLG). In this section, we will briefly analyze the company such as its history,

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business model, projects along with major projects contributing to the growth of revenue

and development of the company in the future. SWOT analysis will also be mentioned

to clarify more about various aspects of the company. Then there are financial indicators

such as Profitability ratio, Gearing ratio, Liquidity ratio or Efficiency ratio for 5 years

from 2017 to 2021. And finally, there will be the valuation of the company according to

the P/E, P/B and EV/EBITDA methods to make recommendations on whether to BUY

or SELL shares of the real estate company.