Industrial park stocks attractive post-pandemic
Despite short-term difficulties, the prospects for industrial park stocks will increase after the COVID-19 pandemic is over, driven by the relocation of global firms to diversify supply chains, with many picking Vietnam as their destination.
The complex development of the pandemic had adverse impacts on investment and leasing in industrial parks.
Vietnam has 336 industrial parks with a total area of 97,800 hectares, of which 261 are in operation. Data from the Ministry of Planning and Investment showed the average occupancy rate in operating industrial zones was at 76% by end-June.
Both revenues and profits of industrial park (IP) developers slumped in the first six months. Total revenues of 18 listed IP companies reached VND21.4 trillion (US$922.4 million), down 14% from 2019, while their net profits declined 18% to VND3.6 trillion.
Poor business results negatively affected stock prices of big companies such as Becamex IDC (BCM), whose revenue was down 24% and net profit decreased 52% year-on-year, and Kinh Bac City Development Share Holding Corp (KBC), whose revenue and net profit plummeted by more than 50%.
Shares of these two companies also lost about 10% in the first half of the year.
According to Saigon Securities Inc (SSI), the COVID-19 pandemic has caused serious disruptions in global supply chains and businesses are seeking to diversify their production activities, from which Vietnam is expected to benefit.
If the pandemic was brought under control by the end of this year, demand for industrial parks will increase, especially from firms planning to move part of their production to Vietnam, such as Microsoft, Panasonic, Sharp and FoxConn.
The policy of encouraging foreign direct investment (FDI) of Japanese and Vietnamese governments can also create opportunities for some Japanese enterprises to expand production to Vietnam, such as Shin-Etsu Chemical, Hoya Corporation, Matsuoka, Meiko Electronics, Yokowo and Nikkiso.
The Government’s planning of new industrial zone development for 2021-2025 can also help increase the area of new industrial zones in the future. Large IPs with a total land area of 1,000ha or more could attract large FDI corporations, SSI wrote in a report.
The improvement of infrastructures, such as the Bien Hoa-Vung Tau, Dau Day-Phan Thiet expressways, North-South Expressway, Cai Mep Thi Vai Port and Gemalink Port, facilitate connection for industrial zones.
In addition, the leasing price of industrial land in Vietnam is about 30%-40% lower than that of Indonesia and Thailand which can be an advantage in attracting FDI. Therefore, the land price in IPs is expected to increase by 7%-8% in the South and 5%-6% in the North in 2021, according to SSI.
Share prices of many IP developers have also increased recently.
BCM lost 10% in the first six months but started to pick up since August. BCM is being traded around VND42,000 (US$1.81) per share this week, up 62% since its bottom in June.
Shrugging off losses in the first six months, shares of KBC also rose 63% compared to early this year, being traded around VND13,500 a share.
Prices of smaller companies’ shares such as Tan Tao Investment and Industry Corp (ITA), Sonadezi Chau Duc Shareholding Co (SZC) and Long Hau Corp (LHG) also climbed between 51%-79% each.
