(DTCK) The special competitive advantage of Hung Thinh Incons (HTN) is in the ecosystem of Hung Thinh - the leading real estate corporation in Vietnam, providing a stable source of "reserved" jobs, promoting higher revenue and gross profit margin than other companies in the same industry.
Lavita Charm Apartment (Thu Duc City, Ho Chi Minh City) built by HTN as a general contractor was handed over to customers
What is the reason HTN stock’s nearly doubling in the fourth quarter of 2021?
HTN is one of the stocks attracting good cash flow in the securities market, with an impressive increase momentum of more than 100% since the beginning of October 2021 (calculated at adjusted prices). Investors believe that this stock still has a lot of rooms for a good price increase, coming from the strong growth momentum in the coming years, having a distinct competitive advantage and strategic cooperation with major partners to participate in the bidding of transport infrastructure projects - fully benefiting "3 in 1" from construction, real estate and promoting public investment.
Looking back at HTN's information, this expectation is not without grounds.
With 15 years of experience and technical expertise in many projects, Hung Thinh Incons is a leading brand in the construction industry, often participating in large-scale construction projects as a general contractor. Succeeding with the high-rise construction segment in major cities, since 2020, HTN has expanded to the segment of building megacities in satellite cities, second-tier cities and infrastructure projects connecting these megacities in the following 5 years.
As a pillar of Hung Thinh Corporation's "development accompanying" strategy, HTN will strengthen cooperation with real estate investors outside the Corporation in the role of general contractor, and at the same time provide package solutions from development consultancy, business management, supporting investors to successfully develop projects with optimized resources from the ecosystem of Hung Thinh Corporation. Notably, thanks to the assurance of construction progress, safety, quality ... and aesthetics in the works, HTN always brings the best products in each project invested and developed by Hung Thinh Land.
Up to now, HTN has owned strong construction capacity with 23 completed projects, corresponding to over 2 million m2 of construction floor area, construction value of about VND 12,200 billion. While units in the same industry compete fiercely for gaining more contracts, HTN has an abundant number of works from Hung Thinh Land's projects, is constructing nearly 20 projects in many localities such as Ho Chi Minh City, Ba Ria - Vung Tau, Binh Duong, Dong Nai, Khanh Hoa, Binh Thuan, Binh Dinh... with total construction contract value of VND 19,500 billion.
In the third quarter of 2021, HTN signed a new contract from New Galaxy Nha Trang project with a value of VND 1,500 billion, the construction value (backlog) is estimated at more than VND 30,000 billion, ensuring the Company's revenue in the medium term.
In addition, the synergy from the ecosystem is promoted, such as an experienced legal staff, project design and development in accordance with market needs, outstanding sales ability from PropertyX member unit (sales of 80% of total products launched within 3 months), helping Hung Thinh Land to ensure cash flow, thereby also ensuring profits for HTN and investors.
On the other hand, the advantage of clear product understanding and construction planning from the very beginning for Hung Thinh Land's projects helps HTN optimize costs, contributing to a higher gross profit margin. Taking advantage of the power of the Corporation's ecosystem, HTN can also expand the construction market to the outside, boost profits.
The result shows that, for the last few years, HTN has had a clear change in business performance and outstripped domestic construction enterprises, in which compound annual growth rate (CAGR) of net revenue in 2016 – 2020 period was 24%/year, gross profit margin was high at 8 - 10%, while the industry average was at 6 - 7%.
Among the top 3 civil construction companies listed on the securities market, including CTD, HBC, and HTN, HTN has a superiority in financial indicators, but HTN's stock valuation is still quite modest compared to the general market. According to data from Fiintrade as of December 17, 2021, HTN ROE was impressive at 15.33%, but capitalization and valuation according to P/E trailing was 19.62x, lower than CTD and HBC.
Many investors think that this is a low P/E valuation rate for an enterprise with large growth potential and available job resources like HTN.
Sustainable growth
The third quarter of 2021 was the period when the whole construction industry faced great challenges from Covid-19 pandemic with regulations on social distancing and blockade in major cities, especially construction works in Ho Chi Minh City had to be suspended, raw material prices escalated and the real estate market slowed down, which affected the revenue and profit of enterprises in the industry. Not out of that context, HTN was also affected in combination with difference in revenue from the transfer of real estate projects, so there was a decrease compared to the same period last year.
HTN’s consolidated net revenue in the third quarter of 2021 reached VND 653 billion, profit after tax reached VND 22.4 billion, down compared to that in the same period, mainly due to revenue and profit from the investment in Richmond City project recorded in 2020. Accumulated for 9 months, HTN achieved consolidated net revenue of VND 3,508 billion, profit after tax reached VND 143 billion. This is a positive result in the context that many units in the industry suffered from losses, negative cash flow and even had to shut down.
Immediately after the social distancing, HTN immediately accelerated the construction of projects to keep up with the handover schedule. A representative of HTN said that in the fourth quarter, the Company continued to accelerate efforts to realize the plan as set out in 2021.
According to a report in July 2021 of Rong Viet, by the end of 2020, the value of VND 37,030 billion (equivalent to USD 1.6 billion) will be the main growth driving force in the following 3 years of HTN. HTN's consecutive workload is very abundant, when each year, Hung Thinh Land is estimated to bring to the market from 7,000 - 10,000 products and is planning to develop projects with total development value of up to USD 14.5 billion in the following 5 years.
Hung Thinh Land is also a "big man" with the owned land fund and is studying to continue to expand up to 7,900 hectares in the future. This is the basis for implementing future projects for Hung Thinh Land, leading to the "available" workload for HTN itself.
HTN's representative shared, it was expected that the value of construction volume in the following 5 years would grow by 30%/year on average. As a key member in charge of construction in the ecosystem of Hung Thinh Corporation, with the number of projects constantly expanded from Hung Thinh Land, total value of construction contracts of HTN was expected in 2022 - 2026 period would be up to VND 95,000 billion and could continue to increase further when the new strategy of the Company is implemented.
The General Meeting of Shareholders (GMS) in October 2021 added 4 new members with expertise in finance - investment, construction, architecture and technology to the Board of Directors (BOD) for 2021 - 2026 office term. BOD of HTN includes experienced names in the civil and infrastructure construction industry, in which Mr. Nguyen Dinh Trung is the Chairman of the BOD and Mr. Cao Minh Hieu is Vice Chairman of the BOD. Previously, the Board of Management of HTN also added a new member with many years of experience in managing major construction projects, Mr. Le Quynh Mai - Deputy General Director of infrastructure development. Accordingly, HTN hopes to promote and develop the infrastructure segment to become a strength in the coming years.
Recently, HTN has closed the list of shareholders to pay 80% dividend in 2020 in shares, corresponding to issue more 39.6 million shares. At the same time, the General Meeting of Shareholders also approved the guideline of private placement with maximally 25 million stocks, the implementation time is expected to be in 2022. A representative of HTN said that up to now, many partners have been interested in and applied to becoming a shareholder accompanying the Company.
Investors think that the capital increase is reasonable because the current capital scale is quite modest (charter capital of VND 891 billion) compared to the value of the current awarded projects, is also to continue to increase competitive capacity as the general construction contractor of large real estate projects as well as participate in upcoming infrastructure projects valued tens of thousands of billion dong.
According to Dau Tu Chung Khoan
