Difficulties piling up
According to statistics, credit growth in real estate at the end of the third quarter increased by 16% compared to the beginning of the year, higher than the growth rate of the economy which is 11%. With this growth rate, real estate credit now accounts for 21% of total credit of the whole economy. This is the reason why the State Bank of Vietnam has tried to cool down the real estate market to avoid a bubble in real estate prices. It is alarming that most real estate enterprises have huge debts that are increasing by 43% over the same period last year. In this, PDR and VPI enterprises recorded a sharp increase in overdue debts compared to the previous quarter.
While credit policy was tightened, the mobilization of capital through the issuance of corporate bonds also encountered difficulty after the case of Tan Hoang Minh came to light and the Ministry of Finance tightened corporate bonds issuance. But the difficulty in mobilizing capital from the bonds market is not as worrisome as the approaching maturity date.
According to estimates of KB Securities Vietnam (KBSV), the total maturity value of corporate bonds in 2023 and 2024 is VND 374,300 bln and VND 381.2 bln, respectively. In this, real estate groups account for the second largest portion after banks, with VND 120,400 bln and VND 121,100 bln, respectively. The list of real estate companies with bonds maturing in the fourth quarter are LSG with VND 1,850 bln, HDG with VND 500 bln, KHG with VND 300 bln, DLG with VND 268 bln, SCR with VND 268 bln, SCR with VND 80 bln, and FCN with VND 80 bln.
Negative revenue growth
Although the deadline for processing the number of mature bonds has not yet reached the deadline date, real estate businesses have already tasted the bitter fruit since the third quarter, when most of the first real estate developers recorded negative revenue growth compared to the same period last year. Falling revenue is the cause leading to decline in profit after tax of real estate enterprises.
Many large enterprises also recorded a rather high negative growth rate. In addition to output factors, real estate enterprises also face high construction costs when the price of steel and construction materials such as cement, concrete, stone, and sand have increased sharply since the beginning of 2021. These are also factors that have reduced the profits of real estate enterprises.
The above difficulties are the reason why the group of real estate stocks has plummeted in recent days. This adjustment period not only caused damage to investors holding real estate stocks, but even business leaders were affected when securities companies announced the sale of mortgaged shares.
In November, for instance, Tan Viet Securities Company (TVSI) sold mortgages of millions of shares of Mr. Nguyễn Văn Đạt, Chairman of the Board of Directors of PDR. Yuanta Securities Vietnam (YSVN) also sold 2.1 million shares of Mr. Nguyễn Thiện Tuấn, Chairman of the Board of Directors of DIG. In addition, Mr. Tuấn's two children, Mr. Nguyễn Hùng Cường and Ms. Nguyễn Thị Thanh Huyền, both currently holding the position of Vice Chairman of Board of Directors, also sold off mortgages totaling more than 2.9 million shares of DIG. Previously, Mirae Asset Vietnam Securities (MAS) also sold 7.2 million shares of DIG of Mr. Tuấn's father and son.
Normally, after selling mortgages with dozens of floor cleaning sessions, the stock prices of real estate companies such as PDR, DIG, HPX, or NVL recovered strongly with many sessions hitting the ceiling price. A lot of investors who bought and caught bottom won big when they successfully took profit as soon as the stock returned to their account. However, there are still many investors who want to buy and catch bottom of stocks that are discharged like above and have to taste losses, either because they buy to catch bottom early or sell to take profit slowly when the stock turns down again after a few rising sessions.
According to analysts, the recent gaining sessions of real estate stocks are only technical recovery sessions. At the moment, it is difficult to expect real estate stocks to bounce back as strongly as in the beginning of the year. The reason is that real estate stocks are still under too much downward pressure. Specifically, in addition to fear of bond maturity pressure, it also comes from criminal cases with price manipulation activities on the stock market, because many real estate stocks are classified as speculative stocks.
In addition, the macro information is not supportive of the real estate industry such as inflation, credit tightening policies, and capital flow into real estate business activities and the stock market. Rising housing costs and tight supply leads to low liquidity in the real estate market and a decline in profits of real estate businesses. These are factors that make real estate stocks unable to receive cash flow.
Even when assessing business activities of real estate enterprises in 2023, analysts of Guotai Junan Vietnam Securities Company (IVS), said that a pessimistic situation and risks will prevail. IVS assessment comes from factors such as world economic recession affecting peoples’ incomes, interest rates remaining high, house prices declining, and need for cash flow which requires selling off inventory at a discount, and customers racing to sell to cut losses because of interest rate grace period ending.
In the long term, real estate is still a potential industry with good growth opportunities. Even companies under pressure with mature bonds are not worried, especially large enterprises like NVL or SCR. These enterprises all recorded large new opening sales and the ability to raise capital from abroad through issuance of bonds and convertible bonds. Therefore, the ability to balance cash flow and loan repayment is quite feasible right now.