REE - Slower-than-expected sales recognition from real estate segment, downside risk apparent - Earnings Flash
  • 2024-10-31T00:00:00
  • Company Research

REE released its Q3 2024 results with revenue of VND2.0tn (USD81mn, +3% YoY) and reported NPAT-MI of VND480bn (USD19.2mn, +7% YoY). The YoY uptick in revenue was driven by 13% YoY growth from the power segment (mainly from hydropower), which outweighed lower revenue from the M&E segment. Additionally, favorable hydrological situations, as well as high mobilization from hydropower in Q3, overshadowed lower earnings from the office leasing segment.

For 9M 2024, REE’s revenue declined slightly to VND6.0tn (USD242mn, -7% YoY) and reported NPAT-MI fell more significantly to VND1.3tn (USD53mn, -22% YoY), completing 69%/65% of our respective full-year forecasts. We attribute the YoY contracted earnings to weaker YoY revenue and earnings from the power segment (mainly due to hydropower with significant low mobilization and unfavorable weather conditions in H1).

We see downside risks to our 2024F NPAT-MI forecast, mainly due to the slower-than-expected earnings recognition from the real estate segment, pending a fuller review. Additionally, capex and new project developments are broadly in line with our expectation.

We currently have a MARKET PERFORM rating for REE with a target price of VND68,100/share.

The power segment’s 9M revenue was VND2,942bn (USD118mn, -17% YoY) and reported NPAT-MI was VND602bn (VND24.1mn, -35% YoY), fulfilling 75%/66% of our respective full-year forecasts. These results are broadly in line with our projections as stronger-than-expected hydropower earnings potentially offset slightly lower-than-expected profit from the wind segment and the lower-than-expected dividend received from PPC, and its lower stake (reduced by 2.8% to 20.7% by end-Q3).

Office leasing and real estate NPAT-MI complete 68%/8% of our respective full-year forecasts. We see downside risks from the slower-than-expected earnings recognition from sales of the Light Square project in Bo Xuyen (Thai Binh Province) with respective 9M revenue and NPAT of VND80bn and VND17bn, completing 13%/8% of our respective full-year forecasts.

The M&E segment recorded 9M NPAT-MI of VND72bn (USD2.9mn, +7% YoY), completing 51% of our 2024F full-year forecast, slightly trailing our expectation due to ~VND59bn of provision expenses booked for accounts receivable in Q2.

The water segment’s 9M revenue and NPAT-MI respectively declined by 25%/25% YoY, mainly driven by higher depreciation from Song Da Water volume expansion phase 2 and weak performance from its subsidiary, TK Plus JSC. 9M sales volume ticked up 2% YoY while earnings are in line with our forecast (completing 71% of our 2024F projection).

Figure 1REE’s 9M 2024 results 

VND bn

Q3 2023

Q3 2024

YoY

9M 2023

9M 2024

YoY

% of our 2024F

Net Revenue

1,962

2,029

3%

6,505

6,048

-7%

69%

M&E

767

705

-8%

2,081

2,186

5%

73%

Office leasing & real estate

267

282

6%

801

876

9%

50%

Power

895

1,008

13%

3,564

2,942

-17%

75%

Water

32

33

5%

59

44

-25%

66%

Others

0

34

N.M.

0

0

N.M.

N.M.

Reported NPAT-MI

450

480

7%

1,684

1,315

-22%

65%

M&E

41

38

-7%

67

72

7%

51%

Office leasing & real estate 

143

109

-24%

421

396

-6%

51%

Power

195

258

32%

931

602

-35%

66%

Water 

77

71

-8%

262

197

-25%

71%

Others

-6

4

N.M.

2

48

1879%

N.M.

Source: REE, Vietcap

Figure 2: REE’s 9M 2024 power revenue and NPAT-MI

VND bn

9M 2023

9M 2024

YoY

% of Vietcap's 2024F

Revenue

3,654

2,942

-19%

75%

Hydropower

2,311

1,626

-30%

79%

Wind power

588

573

-3%

65%

Solar power

198

209

6%

71%

Retail electricity*

467

534

14%

79%

NPAT-MI

931

602

-35%

66%

Hydropower

731

392

-46%

87%

Wind power

121

156

29%

60%

Solar power

38

58

53%

77%

Retail electricity

18

21

17%

123%

Thermal power

52

34

-35%

21%

Holdco power financial expenses*

-29

-59

103%

128%

Source: REE, Vietcap (* Revenue and NPAT-MI from the Tra Vinh Electric Development JSC – UPCoM: DTV)

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