Vincom Retail stocks drop to historic low

Contrary to the general market recovery since September 2023, shares of the top mall operator in Vietnam, Vincom Retail JSC, listed on the Ho Chi Minh Stock Exchange as VRE, have not been able to escape the doldrums.

At the close on Friday, VRE had fallen to VND20,000 ($0.8) per share, the lowest since early 2020 when Covid-19 broke out, and down 34% over the last one year.

Vincom Retail was established in 2012 to develop and operate commercial centers under the Vincom brand of Vingroup. At the time the company went public in 2017, there were some 40 shopping centers and its ambition was to increase that figure to 200 by 2021.

In February, VRE jumped from VND22,000 ($0.86) to VND26,701 ($1.07) per share on the news that Vingroup had divested capital and a new group of shareholders appointed people to the board of directors.

Vingroup announced the sale of 100% of its capital in SDI, a unit that held 41.5% in Vincom Retail. After the transaction, Vingroup still owned 18.8% of the company and remained an important strategic partner, while the transaction did not affect the development of commercial centers.

However, since March 18 after Vingroup announced its divestment, VRE shares have returned to a downward trajectory. This development was quite surprising, as many analysts believed that the divestment deal would make VRE shares more attractive.

Yuanta Securities said that the major shareholder's divestment would bring two positive factors to Vincom Retail. They were to reduce the risk related to internal transactions and negative impacts from related companies that the market is applying to price. Given that Vingroup sold its VRE shares for VND32,000 ($1.26), the stock was forecast to rise to VND38,000 ($1.5) per share within 12 months.

Similarly, Mirae Asset Vietnam Securities also commented that the deal would make VRE shares more attractive by reducing related risks, with a target price of VND32,000 ($1.26) per share. However, this also had the risk of affecting Vincom Retail's future investment activities because it was dependent on Vinhomes for the handover of premises between street front projects and commercial centers.

One thing analysts have appreciated about Vincom Retail is that its business results are recovering well. As a leading retail space business, management, and operation unit, the company's business results were seriously affected by the Covid-19 pandemic when partners and customers reduced rents due to unfavorable business conditions.

However, when the pandemic was brought under control, the company had an impressive recovery. In 2023, Vincom Retail recorded revenue of VND9,791 billion ($384 million), an increase of 33% compared to 2022. Its net profit was VND4,408 billion ($173 million), an increase of 59%. In the first quarter of this year, the business posted a net profit of VND1,082 billion ($42.5 million), the fifth consecutive quarter it had surpassed VND1,000 billion ($39.3).

In 2024, Vincom Retail is targeting net revenue of VND9,500 billion ($373 million) and an after-tax profit of VND4,420 billion (165 million), a slight increase compared to 2023. The company currently has 83 shopping centers, located in central locations across 44 provinces and cities in Vietnam.

It plans to open six new shopping centers, bringing the total number to 89 in 48 provinces and cities this year. Over the past five years, the company has opened only four additional centers.

VPBankS Research believed that Vincom Retail has many growth drivers, such as ambitious expansion plans in line with commercial real estate market trends, strong financial potential, and the recovery of the consumer sector.

The business has two main sources of revenue, including retail leasing and real estate transfers. Retail revenue is the main source, with the occupancy rate at its shopping centers up to over 80%. On the contrary, revenue from shophouse transfers is expected to no longer contribute significantly to the company's business results.

In the short term, VRE's expansion strategy will not be affected by the major shareholder's divestment because it paid a deposit to buy Vingroup's land at cost. However, in the long term, VPBankS believes that costs related to land fund expansion will be less favorable.