In 2023, net profit of listed industrial park developers is expected to grow by about 12% year-on-year, as rental prices are expected to increase by 2-3% YoY.
SSI Research has just released the report on Vietnam’s industrial park real estate industry outlook for 2023, highlighting that despite many challenges, demand is expected to remain stable in 2023.
Supply chain shift from China to Vietnam
In the context of newly registered FDI capital decelerates at the end of 2022, 2023 could be a more challenging year for FDI enterprises in Vietnam due to the risk of a global recession.
However, the ongoing trend of shifting production from China to Vietnam will be the growth engine. Vietnam is one of the countries that attracts large manufacturers such as Lego (invested capital of 1 billion USD), LG with a plan to invest further 4 billion USD in Vietnam with the goal of turning the country into a smartphone manufacturing center in the future, as well as Foxconn, one of Apple's main suppliers, is planning to invest $300 million.
Besides, Samsung is looking to increase investment capital in Vietnam to 20 billion USD, focusing on artificial intelligence, big data and other fields.
In 2022, Quanta Computer - the world's third largest outsourcing company - is said to be planning to build a factory in the Northern region, where the company is expected to fulfill orders for Apple MacBooks. ; BOE Technology Group Co Ltd (China), a supplier of both Apple Inc and Samsung Electronics Co Ltd, plans to invest a large amount of capital to build two factories in Vietnam with a leased area of 100 hectares in the North. .
Investment in Vietnam's industrial zones is considered attractive because: VND depreciated less than currencies of countries in the region such as Indonesia, Thailand, India and Malaysia and other key markets of Asia Pacific such as Japan.
Vietnam's FDI attraction policies also help attract investors by offering many incentives such as corporate income tax exemption for the first 4 years of operation, 50% corporate income tax reduction for the next 5 years, following other business support incentives.
The rental price of industrial park real estate in Vietnam is still low compared to ASEAN countries, specifically 30~36% lower than Indonesia and Thailand. According to Colliers, industrial zones such as Bogor-Sukabumi, Tangerang and Bekasi of Indonesia, the average land price fluctuates around $164/m2/rent period, 36% higher than the land price in the industrial zones of Vietnam such as Binh Duong, Dong Nai, Bac Ninh, Hai Phong.
Meanwhile, the improvement of infrastructure with projects such as Bien Hoa - Vung Tau Expressway, Dau Giay - Phan Thiet Expressway, North - South Expressway, Cai Mep Thi Vai Port, Gemalink Port and 3rd & 4th ring road will create more convenient connection between industrial zones.
Rental price tends to increase, along with profit
Rental price is expected to increase slightly when new industrial parks come into operation. In 2022, the Deputy Prime Ministe of Vietnam approved the establishment of 9 new industrial parks, with the total area of 2.472 ha (equivalent to 29,4 trillion VND of total investment capital).
Supply of industrial zones will be limited in 2023 due to: Difficulty in site clearance compensation, especially for existing households. The conversion of rubber plantation land to industrial park land is difficult due to bidding regulations.
In addition, Resolution No. 115/NQ-CP issued on September 5, 2022 on the 5-year national land use plan for the period of 2021~2025 requires limiting and strictly controlling the conversion of rice land, especially when converting to industrial land.
SSI Research predicts that land prices in industrial zones in the South will increase at a slower rate of 1 - 2%, when the supply of real estate in tier 1 cities (Ho Chi Minh City, Binh Duong, Dong Nai, etc.) , Long An) is limited, and new supply in tier-2 cities (Ba Ria - Vung Tau, Binh Phuoc, Tay Ninh,...) increased by 5 - 6% over the same period.
Hai Phong and Bac Ninh will continue to lead in the supply of industrial land for lease in the North, whereby Tien Thanh Industrial Park (Hai Phong) and Gia Binh 2 (Bac Ninh) with an area of 410 ha and 250 ha will come into operation in 2023, the average rental price of Northern industrial zones is likely to increase by 1 - 2% during the year.
In 2023, the net profit of listed industrial park developers is expected to grow by about 12% over the same period, due to: (1) the total leased land area increases by about 10%/year; and (2) rental rates are expected to increase 3% y/y in industrial parks in the south and 2% y/y in industrial parks in the north by 2023.
Some highlights include: MOU contracts signed in 2022 will help industrial parks' profits grow positively in the first 6 months of 2023. Demand for land in industrial zones that increased sharply in 2022, as such parts of the MOU contract will be completed in the first half of 2023.
Specifically, among the listed Industrial Parks, IDC can book about 60 - 80 hectares of land for lease (up 100% over the same period) in the first 6 months of 2023 from extended Phu My II and Huu Thanh Industrial Parks. Meanwhile, BCM recorded 60 hectares of leased land in Bau Bang and Cay Truong Industrial Parks, SZC recorded 21 hectares of leased land, mainly from contracts with Sonadezi Corporation (SNZ).
Positive cash flow when changing rental payment schedule from investors.
Please note that some industrial park developers have changed the payment period from 1 year to 6 months from the last 6 months of 2022, specifically the payment schedule will be as follows: payment of 5% of the contract value at the time of signing the MOU, pay 50 - 60% of the contract value in the next 10 days to 3 months, paying 95% of the contract value in the next 3 months.
By speeding up the payment schedule, the cash flow of companies with large available land resources such as IDC, SZC, & BCM will be positive, outstanding loans will decrease and dividend payout ratio will increase.
Listed industrial parks with land for lease that have the advantage of low investment costs will continue to maintain high profit margins. Therefore, SSI Research prefers companies with the remaining land resource for lease with low investment costs such as IDC, SZC, BCM, VGC, with high rental prices in 2022, which will help to maintain compound profit margins over 40% in 2023.
Source: https://vneconomy.vn/gia-thue-dat-cong-nghiep-tang-loi-nhuan-doanh-nghiep-du-bao-tang-12-nam-2023.htm
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