Vinaconex (HOSE:VCG) | Quick Update, ADD - 1Y Upside +8.4%

VALUATION PENDING TO BE UPGRADED UPON STAKE DIVEST IN VCR IN 2025

Key Takeaways

VCG’s Board of Directors has approved the full divestment of its 51% stake (107.1 mn shares) in Vinaconex Investment and Tourism Development JSC (VCR), at a minimum expected price of VND 48,000/share.

Impact Assessment

We view this divestment as a strategically important move for VCG, with several positive implications:

o       Strategic exit from a complex, large-scale project: The Cat Ba Amatina project has remained dormant for over a decade due to market headwinds and the complex scale of development. VCG lacks experience in executing large, mixed-use real estate projects. Exiting now mitigates prolonged execution risk and realigns strategic focus.

o       Reallocation of capital toward core business: The transaction frees up a significant amount of capital, enabling VCG to reinvest into more feasible, higher-return real estate projects as well as refocus its core infrastructure and construction segments.

o       Strengthening of financial position: The expected proceeds could be used to repay outstanding debt, thereby improving leverage ratios and overall balance sheet health.

Given the strategic, operational, and financial benefits, SBBS believes that a successful divestment will serve as a material catalyst for the share price.

VALUATION UPDATE

The Cat Ba Amatina project was previously booked at VND 7,712 bn (including inventory and construction-in-progress). Applying a conservative P/B multiple of 1.2x, the fair value of the project is estimated at VND 9,254 bn, with VCG’s 51% stake contributing VND 4,720 bn to RNAV. We have reviewed our SOTP valuation model to reflect the potential transaction.  Excluding the project and incorporating expected cash inflows, RNAV/share is revised upward from VND 21,787 to VND 23,246/share. Fair value estimates are updated as follows:

o       DCF-based valuation: from VND 27,646/share → VND 32,372/share

o       P/B-based valuation: from VND 27,149/share → VND 25,849/share

The DCF uplift is driven by increased cash holdings and improved capital structure. The lower P/B valuation reflects the book value adjustment post-divestment.

Recommendation Update

As there are still uncertainty factors including divestment price and timing, we would keep our current valuation and 12M target price for VCG at VND24,600/share (+8.4% upside). We reduce our 12M call for VCG from BUY to ADD to reflect the lower 12M upside as the stock have moved up well (+12.6%) since we issued our initiation. Long term upside is still ample, thus we keep a BUY recommendation for 3Y view at updated target price of VND 34,350/share.

In case VCG could divest from Cat Ba Amatina successfully at the proposed price, we would revise our 12-month TP from VND 24,600 to VND 26,200/share (+15.4% upside) to factor the updated valuation post-divestment.