Industrial park stocks attractive post-pandemic
Industrial park stocks attractive post-pandemic
Despite short-term difficulties, the prospects for industrial zone stocks will increase after the COVID-19 pandemic is over, driven by the relocation of global firms to diversify supply chains, with many picking Viet Nam as their destination.
The complex development of the pandemic had adverse impacts on investment and leasing in industrial parks.
Viet Nam has 336 industrial zones 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 per cent 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 per cent from 2019, while their net profits declined 18 per cent to VND3.6 trillion.
Poor business results negatively affected stock prices of big companies such as Becamex IDC (BCM), whose revenue was down 24 per cent and net profit decreased 52 per cent year-on-year, and Kinh Bac City Development Share Holding Corp (KBC), whose revenue and net profit plummeted by more than 50 per cent.
Shares of these two companies also lost about 10 per cent 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 Viet Nam 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 Viet Nam, 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 Viet Nam, such as Shin-Etsu Chemical, Hoya Corporation, Matsuoka, Meiko Electronics, Yokowo and Nikkiso.
The Government’s planning of new industrial zone development for 2021-25 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 Viet Nam is about 30-40 per cent 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 per cent in the South and 5-6 per cent in the North in 2021, according to SSI.
Share prices of many IP developers have also increased recently.
BCM lost 10 per cent in the first six months but started to pick up since August. BCM is being traded around VND42,000 ($1.81) per share this week, up 62 per cent since its bottom in June.
Shrugging off losses in the first six months, shares of KBC also rose 63 per cent 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 per cent each.
