Khang Dien House (HOSE: KDH) | Initiation Report, BUY - 1Y Upside +19.6%

Company Overview

Khang Dien House Investment and Trading JSC was established in 2001. In 2007, the company successfully IPOed and has been listed on the Ho Chi Minh Stock Exchange (HoSE) since 2010. The company primarily operates in residential real estate development and investment mostly in HCMC and is recently expanding with two industrial real estate projects. KDH started with low-rise residential products including townhouses and villas. Since 2017, Khang Dien (KDH) has also ventured into mid-range high-rise residential projects.

Financial Performance

Khang Dien undoubtedly has the healthiest balance sheet among the top real estate developers in Vietnam. As of the end of Q3/2024, Khang Dien’s total assets amounted to VND 29,855 billion, reflecting a 20.7% increase, with inventory remaining the largest asset category, comprising 75.2% of total assets. Equity reached VND 18,883 billion end of Q3 2024 while total liabilities were VND 12,722 billion. KDH debt to equity ratio is less than 0.7, which shows the company's proactive approach to managing capital structure as part of its ongoing growth strategy.

Investment Rationales

o       Reputable real estate developer, proven project development capacity

o       A large land fund that could support long-term development potential: Khang Dien currently owns a land bank with a total area of over 600 hectares. In the context of scarce land in central areas of Ho Chi Minh City, Khang Dien has a competitive advantage over industry rivals, as the company’s projects are concentrated in Thu Duc City, Binh Tan District, and Binh Chanh District.

o      Safe and stable financial leverage ratio.

Valuation and Recommendation

Based on our forecast of revenue from the company's ongoing projects, SBBS recommends a BUY on KDH share with a target price over the next 12 months at VND 41,150/share, an upside potential of 19.6% from closing price of 34,400 in 09/12/2024.