Real estate stocks continue to shine bright in 2022

December, 23/2021 - 08:28
After continuously rising and hitting new price levels since the beginning of the year, real estate stocks once again have emerged as the market’s leader in recent sessions. 
Buildings of Gamuda City, an urban project in Hà Nội. VNA/VNS Photo

HÀ NỘI — After continuously rising and hitting new price levels since the beginning of the year, real estate stocks once again have emerged as the market’s leader in recent sessions. 

The stock group also benefitted from the land auction in Thủ Thiêm, HCM City, with the extremely high price of up to VNĐ2.4 billion (US$104,552) per square metre.

The industry insiders said that the real estate sector has been at a fairly high price level after the first rising wave of the year, which related to the plan to increase capital and expand the land fund of enterprises. 

Therefore, experts have sent technical warnings to investors. Accordingly, the investment strategy for real estate stocks is to wait for a clear signal of breaking over the resistance zone or to look for stocks that have just escaped the recent resistance level. 

Lê Quang Minh, analysis director of Mirae Asset Securities, sees a positive outlook for the industry. "Real estate stocks are bright spots in 2021 after continuous increases, and still have room to inch higher,” Minh said. 

Although there is a risk from China, which relates to the difficulties of Evergrande Group, raising concerns in the Vietnamese market. However, the story in Việt Nam is completely different, said Minh and adding that after reviewing the financial health of large property developers in Việt Nam, the result is even better than it was in 2020. Thus it is not possible to compare Evergrande's weak debt service coverage in China with other businesses in Việt Nam.

In the real estate industry, there are two metrics to keep in mind, which are operation efficiency and inventory turnover. Of which, inventory turnover is more important. If the inventory is turned, the property is sold. And this factor is not the concern at the moment. 

According to Mirae Asset, some big players in the real estate group such as Novaland (NVL), Phát Đạt Real Estate Development (PDR), Development Investment Construction (DIG) and Gelex Group generally benefit in the low interest rate environment. 

In addition, the positive regulatory environment, as well as reforms that speed up the regulatory approval processes, are among factors driving the growth of the industry.

Real estate stocks with strong gains are all having their own growth story related to the potential of the accumulated land bank, the absorption of projects, and the development plan to expand activities in the future.

Moreover, experts widely forecast the stock market may continue to grow strongly in 2022, boosted by the increase in business activities, which pulls up earning per share (EPS). 

Based on data tracking price per earning ratio (P/E), Mirae Asset said that the appropriate P/E ranges from 15 to 17x. 

With a forecast EPS for the 2020-2022 period of about 29 per cent a year, which is lower than the market expectation of 30 per cent a year, and a P/E of about 16x, the market benchmark VN-Index is expected at about 1,700 points in the basic scenario, up 15 per cent from the closing level at the end of November, the securities firm said. 

The market’s drivers were investors' optimism about the Government's ability to control the pandemic, fiscal support packages, economic growth and corporate profits.

And amid low savings interest rates, it is expected that the idle money will continue to shift to the securities investment channel, so the market liquidity will continue to be abundant.

Low interest rates also help to stimulate growth through investment stimulus, and restore production with lower capital costs.

State capital divestment and the prospect of a market upgrade also provide support for the market. 

On the other hand, the biggest risk now is the possibility of out-of-control COVID-19 outbreaks, and the development of new coronavirus strains, causing panic among investors. 

However, with the long-term bullish outlook, experts believe that the market's deep corrections are an opportunity to buy and accumulate good stocks. VNS

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