WHY VINCOM RETAIL?
Vincom Retail is the largest retail developer, owner and operator in Vietnam. It could therefore be considered as one of the ultimate consumer plays on the stock market. At the end of 2020 they owned 80 retail malls in 43 out of 63 cities and provinces. It’s gross floor area reached about 1.7 million square metres. In 2020 Forbes Vietnam had them in their top ten leading Vietnam brands.
AN OVERVIEW OF THE VINCOM RETAIL (HOSE:VRE) BUSINESS
Firstly, to see where Vincom Retail fits into the bigger picture of you can refer to the graphic below on the Vingroup Ecosystem.
The above was taken from a corporate presentation from Vinhomes. You can read about my stock review on Vinhomes via the link just below:
The main operations of Vincom Retail span the following key areas:
- Vincom Center – Owner and operator of malls at high density, high traffic areas with aspirational and international brands, 5 in Hanoi and 2 in HCMC.
- Vincom Mega Mall – Large scale lifestyle malls, mixed use. Huge amount of retail, entertainment, restaurants addressing lifestyle and family needs. 3 in Hanoi and 1 in HCMC.
- Vincom Plaza – Designed for families living outside of the 2 main cities. 54 Vincom plaza malls are spread across some 40 cities and provinces.
- Vincom + – A network of 15 community retail malls in medium density non central locations in Hanoi and HCMC. Or in the central core of towns and provinces of more than 30,000 people.
- Properties for Sale – Develops and sells shophouses mostly in the vicinity of Vincom Plaza and Vincom+ malls, and condominium units and office towers at Vincom Center projects. Cash flow from the sale of inventory properties helps finance the development of its malls.
Vincom Retail Customer Segments
The below graphic is a good way to think about the opportunity set the company has within Vietnam and to see how the earlier main operations I described above fits in.
Source: Vincom Retail Corporate Presentation January 2022
The Retail landscape in Southeast Asia
Although Vincom Retail are the dominant player in Vietnam, there is a good opportunity still to expand in terms of gross floor area. Looking at GFA at some nearby countries and their populations, Vietnam is arguably still at an early stage in embracing modern retail.
The trend in the region is that a lot of the retail industry tends to consolidate around the dominant local landlord. This puts Vincom Retail in a good position to capture plenty of growth.
Source: Vincom Retail Corporate Presentation January 2022
Revenue mix of Vincom Retail
You can see from below that over the course of 2019 and 2020, more than 70% of revenues come from leasing. The 2019 figure of around 77% though is probably more indicative of what to expect given how the fortunes of the company were affected from the pandemic.
FACTORS TO DECIDE ON WILL VINCOM RETAIL SHARES BOUNCE BACK IN 2022?
Correlation to Vietnam’s pandemic control – It was painful to see that 2021 the news on the pandemic was even worse than 2020! That obviously makes it a difficult operating environment when you are in the business of leasing malls.
Needless to say, if 2022 turned about to be a similar year of disruption due to the pandemic then it is hard to see a stock like Vincom Retail leading the stock market’s best performers. The share price was relatively flat in 2021 even thought the Vietnam stock market surged some 36%.
On the bright side though, the company plans on opening 3 new large malls this year. That might be the best guide to their confidence that this year will be much better.
Expansion Plans – In terms of expansion as I touched on just above, the market saturation with modern day shopping malls is relatively immature in Vietnam. There is plenty of scope for Vincom Retail to expand as I touched on earlier, when looking at what has occurred in other parts of Southeast Asia. Management though need to make the right calls on the execution of such strategy.
Vietnam’s growth in “modern retail” – However the pace of that expansion I just mentioned will go a long way to whether the shares outperform in the future or not. This relies on the top-down themes of the Vietnam consumer overall.
Like other “consumer plays” on the Vietnam stock market, they are tied into the fortunes of that well documented thematic about Vietnam’s rising middle class. If this occurs better than many economists suggest then this stock should be a good one to own. You can see from the earlier graphic I posted on their multi-format model, that a lot of their operations are aimed at that sweet spot of emerging middle-class consumers.
FDI in Vietnam – The country is experiencing a lot of interest from well recognized large international brands that want to do business in Vietnam. Many such brands are from the food & beverage and retail sectors that would potentially make the Vincom Retail malls even better.
VIETNAM STOCK MARKET VALUATIONS – VINCOM RETAIL PE RATIO, YIELD ETC.
Vincom Retail PE Ratio – 55 times
Vincom Retail dividend yield – N/A
* Source: TIKR data captured on April 15th 2022
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VINCOM RETAIL SIZE IN TERMS OF VIETNAM STOCK INDEX AND COMPONENTS
Vincom Retail at the time of writing is about the 24th largest company of my searched of Vietnam stock list of the largest companies. The market cap in USD is circa $3.1 billion.
IS VINCOM RETAIL A GOOD UNDERVALUED VIETNAMESE STOCK TO BUY FOR 2022?
Whilst I do rate Vincom Retail a quality company to own in a portfolio that is perhaps the ultimate consumer play on Vietnam, I am cautious about in terms of valuation. Looking at the table above though the P/E ratio on a forward basis may come back down to the low 20s.
At the same time, I think you would also want to be quite confident that we are going to continue to have promising news in the future to be sure that the worst of the pandemic is behind us. You can see how when that didn’t occur in 2021, the stock was one of the underperformers of the Vietnam stock market.
I like the growth drivers surrounding modern retail expansion in Vietnam including via FDI from big international brands, but just wonder how much of that theme is already reflected in the valuation.
OTHER VIETNAM STOCK INDEX COMPONENTS REVIEWS
If you are interested in similar summaries and analysis on other larger Vietnam listed stocks here are some other links to check out.
And should you want a very quick description of the largest 10 companies listed on the Vietnam stock exchange, be sure to visit the below blog post I made last year.
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
I summarize the largest Vietnam companies by market cap:
Is Vietnam a good investment?
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