The real estate sector faced a challenging start in 2023, with many listed companies reporting steep declines in profit. However, a glimmer of hope shines for the second half of the year as investor confidence begins to rekindle.

Mixed results Second-quarter earnings reports from most listed real estate companies have been unveiled, painting a relatively lackluster picture for the sector. This sentiment holds especially true for residential players, who grapple with dwindling profits. An intriguing contender in the spotlight is No Va Land Investment Group Corporation (Novaland, ticker: NVL). Despite an impressive 72% surge in consolidated revenue during Q2 2023, exceeding VND1 trillion, Novaland wrestles with debt amassed from excessive financial leveraging in prior periods. This has led to an 80% plummet in its stock price. Although the company’s performance improved from April to June, it still reported a loss of VND201 billion, propelling its accumulated losses for H1 2023 close to VND600 billion. Novaland remains committed to ongoing restructuring endeavors and is resolute in fulfilling commitments to buyers across several projects. These include Saigon Royal Residence, Grand Manhattan, Palm City, Aqua City, Aqua Riverside City, Aqua Waterfront City, NovaWorld Phan Thiet, and NovaWorld Ho Tram. The housing developer anticipates returning to profitability in Q3 and Q4 2023, projecting profits of VND310 billion and VND515 billion, respectively. Another company that has garnered attention is Phat Dat Real Estate Development JSC (Phat Dat, ticker: PDR). In stark contrast to Novaland, Phat Dat reported a VND276 billion profit in Q2, a 12.5-fold rise from the previous quarter, fueled by property transfers by its subsidiary. However, these figures still mark a 32% decline compared to the same period last year. In H1 2023, the real estate firm posted VND197 billion in revenue and VND300 billion in net profit, down by a substantial 87% and 57% year-on-year (YoY), respectively. PDR has achieved 47% of its 2023 profit target and assured investors during its 2023 general meeting that the company has overcome the toughest phase. It has also finalized a plan to issue shares to strategic investors, with the proceeds aimed at resolving bond debts. Similarly, Dat Xanh Group JSC (ticker: DXG) and its subsidiary, Dat Xanh Real Estate Services JSC (ticker: DXS), have reported substantial drops in profits. DXG, in particular, witnessed a 54% decline in Q2 revenue compared to the same period in 2022, amounting to VND714 billion. After factoring in expenses, the company achieved a post-tax profit of VND157 billion, down 40% over the same 2022 period. This, however, is seen as positive news for DXG, given its net losses in Q1. For H1 2023, the company recorded a post-tax profit of VND40 billion, down by a sharp 94% versus the same period in 2022. Similarly, DXS witnessed a staggering 49% revenue reduction during April-June, leading to a net loss of nearly VND19 billion. DXS’s gross revenue from January to June reached VND991 billion, with a net loss of approximately VND58 billion. In contrast, Vinhomes JSC (ticker: VHM) bucked the declining industry trend, unveiling a 7.3-fold year-on-year surge in net revenue to VND32,833 billion, and a 14.5-fold year-on-year increase in profit after tax for Q2 to VND9,652 billion, according to its Q2 financial statements. VHM’s net revenue for H1 2023 skyrocketed by 364% to VND62.1 trillion, primarily due to the successful handover of 5,400 homes in the Vinhomes Ocean Park 2 project. Meanwhile, its consolidated net revenue, which incorporates proceeds from operations, business cooperation contracts, and real estate transfers classified as financial income, amounted to VND75,578 billion, soaring by 300% compared to the same period in 2022. With this performance, the firm has achieved 76% of its 2023 revenue target. Nam Long Investment Corporation (ticker: NLG) presents another optimistic case, achieving a 15% year-on-year increase in net profit, driven mainly by sales in its Southgate project in Long An Province and other developments. With net profit of VND128 billion, Nam Long shines alongside Vinhomes as a real estate company bucking the downward trend, thanks to successful project handovers. Supportive policies boost real estate market As the market enters the latter half of the year, optimism surrounds the revival of investor confidence. With Government Resolution 105 recently issued to facilitate business operations and administrative reforms, the real estate sector is anticipated to witness a capital influx in the coming months. In the first six months of 2023, the real estate sector encountered a sluggish flow of funds due to potential buyers hesitating to invest in real estate, influenced by prevailing high interest rates. However, as bank deposits mature, companies foresee a substantial increase in funds directed towards real estate investments, sparking growth in the sector. FiinTrade’s cash allocation statistics exhibit a remarkable surge in funds flowing into real estate since the market’s bottom in July. While the industry shows signs of recovery, it remains below average, signaling ample potential for further expansion. Furthermore, the real estate sector benefits from interest rate reductions and supportive policies. Decree 08, amending Decree 65, empowers real estate companies to ease bond repayment pressures by renegotiating terms with bondholders, notably maturity dates. Circular 02 enables banks to reschedule debt payments while maintaining debt classification, aiding struggling corporate customers, including the real estate sector. Overall, real estate stocks present substantial investment potential. However, variations will exist among real estate companies. To capitalize on sector recovery, investors should target companies boasting sound financial foundations and stable operations.