Despite its strategic advantages and strong portfolio of industrial park (IP) land, KBC’s Board of Directors is under scrutiny for management capacity and past decisions, leaving investors questioning the company’s future.
High Expectations for a Breakthrough
KBC has long been recognized as a pioneer in Vietnam’s industrial park real estate sector, particularly in the northern region. By the end of 2022, the company had an IP land reserve of around 6,387 hectares—accounting for about 5.2% of Vietnam’s total IP land—and an additional 1,263 hectares of urban land. This vast land bank has positioned KBC as a key player in attracting foreign direct investment (FDI) from global corporations like Foxconn, LG, and Canon.
The company’s strategic location and ability to attract large FDI projects have continued to fuel positive expectations, especially in 2024. The “China + 1” strategy, where global companies diversify their manufacturing base away from China, remains a significant opportunity for KBC due to its proximity to China, an abundant young workforce, and competitive production costs. This shift could potentially drive more investments into KBC’s industrial parks, benefiting from Vietnam's growing diplomatic relations with major economies such as the U.S., Japan, South Korea, and the European Union.
To capitalize on these opportunities, KBC's Board of Directors approved a private placement to increase its equity capital shortly after its 2024 Annual General Meeting. The plan involves issuing 250 million shares at a price no less than 80% of the average closing price of the last 30 sessions. The estimated value from the issuance is around VND 6,000 billion, aimed at enhancing KBC's financial capacity to implement large-scale projects and meet the capital requirements of the new Real Estate Business Law.
A Grim Reality
Despite the optimism surrounding KBC’s plans, the company’s performance in the first half of 2024 tells a different story. During this period, KBC recorded net revenue of just over VND 1,044 billion and a net profit of VND 191.2 billion, down 77% and 91%, respectively, compared to the same period in 2023. Revenue from land and infrastructure rentals, the company’s core business, plummeted by 88% to VND 531 billion. With such underwhelming results, KBC has only achieved 12% of its 2024 revenue target and a mere 5% of its profit goal.
This lackluster performance is not unprecedented. In 2023, KBC similarly disappointed shareholders, completing just 63% of its revenue plan and 56% of its profit plan. Moreover, the company announced plans to pay a 20% dividend for 2022 in cash, only to later cancel the dividend payout and also scrap a plan to repurchase 100 million treasury shares. These abrupt changes have eroded shareholder trust, raising concerns about the Board’s management capabilities.
KBC’s Board explained that the decision to forgo dividend payments was made to prioritize buying back bonds and securing capital for project implementation and expansion. During the 2024 Annual General Meeting, the Board acknowledged that KBC’s equity was modest compared to other leading real estate companies. With less than VND 10,000 billion in charter capital, KBC could only manage projects with a total investment of VND 35,000 billion, assuming a 20% equity contribution—a relatively small figure in Vietnam’s booming real estate market.
Legal and Operational Risks
Despite its ambitious plans, KBC is facing significant delays in the legal approval process for its key projects. Most notably, the Tràng Duệ 3 Industrial Park (IP) project in Hai Phong, which has the highest feasibility for completion this year, has not yet received investment approval. This is despite the fact that a customer has already signed a Memorandum of Understanding (MoU) to invest in the project.
The Tràng Duệ 3 IP, covering 678 hectares, is strategically positioned to attract substantial FDI, partly due to its location in the Đình Vũ-Cát Hải Economic Zone, which offers favorable tax incentives. LG Group, one of KBC’s largest clients, has committed to investing an additional USD 1 billion to expand production in this zone, underscoring the potential of the project. If completed, Tràng Duệ 3 IP is expected to generate significant rental revenue and drive KBC’s growth in the 2025-2027 period.
However, legal issues are not limited to industrial parks. The Tràng Cát Urban Area project, another key development in Hai Phong, also faces procedural hurdles. This project spans 585 hectares, with 282 hectares designated for commercial use, and requires a total investment of approximately VND 11,329 billion. Though the project is still awaiting legal clearance, KBC has already recorded a VND 5,600 billion cash deposit from Saigon-Hàm Tân Tourism Joint Stock Company, a member of KBC Chairman Đặng Thành Tâm’s Saigontel ecosystem. This deposit is intended for the brokerage of a 40-hectare transfer of the urban area, but the sale must be completed before September 2025. If legal procedures are not finalized by then, KBC will either have to refund the deposit or extend the arrangement.
As of Q1 2024, KBC had cleared around 100 hectares for the Tràng Cát Urban Area project, with an investment of VND 8,243 billion, mostly covering land use fees and compensation for site clearance. The slow legal progress presents a considerable risk for KBC, especially given that the surrounding infrastructure remains incomplete, which could further hinder sales when the project is eventually opened to the market.
Adding to KBC’s woes is the growing competition in the industrial real estate market. Competitors are gaining ground with faster project execution and better financial management, making it harder for KBC to maintain its competitive edge. The delays in securing legal approvals for key projects like Tràng Duệ 3 IP and Tràng Cát Urban Area have allowed rivals to attract more investors and close deals that KBC might otherwise have secured.
Furthermore, KBC’s reliance on private placements and debt to finance its projects reflects the company’s constrained financial resources. Unlike many of its competitors, KBC has struggled to maintain a robust capital base, which limits its ability to take on large-scale projects. The planned private placement of 250 million shares could provide a short-term financial boost, but it also raises questions about long-term sustainability if legal and operational bottlenecks persist.
