Company Overview
DXG is a well-known brokerage company with over 14 years of experience. Leveraging off its brokerage knowledge, the company has transformed itself into a prominent residential property developer with a focus on the mid-range segment. It currently has 15 residential projects under development in Ho Chi Minh City.
Key Summary
- We raise our target price by 8% for DXG to VND33,700 mainly on an upward revaluation of DXG’s Gem Riverside and Saigon ResRiverside developments as we expect sales to accelerate, as well as higher average selling prices (ASP). However, the stock price has risen 30% since our last update report, prompting us to switch our rating from BUY to MARKET PERFORM.
- We project 2018F NPAT-MI to grow 43% YoY to VND1.1tn (USD47mn), mainly driven by faster deliveries of pre-sold units and robust brokerage growth.
- We also project 2018 pre-sales contract value to grow by 309% to VND4.3tn (USD189mn), as we expect robust demand for the Gem Riverside development.
- Downside risk: Higher inventory risk as DXG’s wholesale brokerage business expands.
A healthy market coupled with DXG’s proven sales capabilities to drive brokerage growth. Brokerage contributed 76% of DXG’s 2017 GP. Per CBRE, Q1 primary condo transaction volumes grew 26% and 5% in HCMC and Hanoi, respectively. This upbeat liquidity indicates demand from homebuyers should remain strong in 2018. DXG’s brokerage arm, which has a market share of over 20%, reported solid performance in Q1 2018, with 3,600 units brokered via its channels, +37% YoY. As such, we still expect segment sales to advance at a double-digit rate of 15% in 2018, despite lower-than-expected top-line growth of 6% in Q1 2018 due to delays with the timing of revenue recognition.
Locked-in pre-sales ensure development growth momentum in 2018. After completing Opal Riverside handovers in Q1 2018, we expect Opal Garden, LuxGarden and Luxcity Officetel (1,000 units, 100% pre-sold) to be delivered over Q1 2018-Q1 2019. As of Q1 2018, the estimated backlog for these developments was VND1.9tn (USD83mn), equivalent to 125% of our 2018F residential development revenue projection. As such, we remain confident in our 55% YoY segment revenue growth assumption of VND1.5tn (USD66mn) for 2018.
Strong initial interest in Gem Riverside’s launch signals brighter earnings outlook. The long-awaited Gem Riverside launch (DXG’s largest residential development yet) finally kicked off in April 2018 with over 1,600 units available to be reserved (50% of total units) at an ASP ranging from USD1,450 to USD1,600 per sqm (10%-20% higher than our previous assumption). Per management, over 90% of units have been reserved, two months out from the sales launch. This bodes well for our NPAT-MI assumption of at least VND2.5tn (USD110mn) for the project, which we expect to be recognized from 2020, and will therefore drive DXG’s EPS CAGR of 33% over 2017-2020F.
Resilient demand for mid-range condos reinforces our optimism for the ResRiverside project. Additionally, Thu Duc District, where the project is located, is benefiting from improving infrastructure, which has been reflected in strong demand for DXG’s nearby projects Opal Garden and Opal Riverside (100% pre-sold).
(Source: VCSC)
To see the full analysis report. Please contact to my email: Hong.nguyen@vcsc.com
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