Nam Long Investment Group (HOSE: NLG) reported a gross profit margin in Q3 / 2019 of 61.5%, far above from the 48% of the same period last year.

According to Q3/2019 Consolidated Financial Statements, NLG’s revenue reached nearly VND 390 billion, whilst revenue for the same period last year was VND 1,330 billion. However, NLG's gross profit margin in the Q3/ 2019 was 61.5%, which is a significant increase compared to the same period in 2018

For the first 9 months of this year, NLG achieved a revenue of VND 1,325 billion and a net profit of more than VND 412 billion, dropped by 51% and 35% respectively compared to the first 9 months of 2018.

According to NLG, the revenue dropdown in the first 9 months was resulted from the ongoing construction of new projects such as Novia, Waterpoint, Parangon Dai Phuoc ... In addition, the handover of existing projects for example Valora Island, Kikyo Flora ... had been completed. In this 9 months, the majority of revenue came from handover of apartments and villas, which was VND 919 billion dong, accounting for 69% of the total revenue; while general contractor and construction services returned VND 312 billion profit, accounting for 24%.

NLG’s representative added, in an interview with us, that the decrease in 9-month result was attributable to the characteristics of real estate industry. Since the beginning of the year, NLG has sold about 1,200 products and compared to the 9-month plan, the net profit has exceeded by 10%.
"NLG’s revenue and profit would increase in Q4 from projects such as Mizuki, Novia and Parangon Dai Phuoc.” NLG will also launch phase 2 of Akari project and kick off the sales of Waterpoint project in Q4.

Reportedly, NLG planned for a 53% increase in revenue from last year’s result of VND 7,900 billion, of which VND 1,058 billion was transferred from the previous year. The expected revenue includes the total value of sales and purchase contracts for product, project and commercial real estate properties. 
Consolidated revenue and net profit are targeted at VND 3,485 billion and VND 956 billion respectively, which equal to an increase of 0.15% in revenue and 25% in profit.

VND 1,200 billion paid in advance by buyers, reduced loan 
By the end of the Q3/2019, NLG’s total assets exceeded VND 10,310 billion, which consisted of VND 1,530 billion of mostly cash and cash equivalents, VND 4,700 billion of inventories, VND 1,700 billion of investment in joint ventures...
In the inventory, largest value was the investment in Parangon Dai Phuoc of over VND 1,700 billion, followed by the investment in Long An (Waterpoint) and Hoang Nam projects.

Notably, as of September 30, 2019, there were about VND 1,200 billion prepaid by buyers  to deposit for apartments, villas, townhouses, land prior to the property handover.
NLG's loan balance is VND 928 billion, slightly lower compared to the beginning of the year. This figure proves the company’s ongoing healthy financial status with a debt / equity ratio at 0.16, maintaining at a low level compared to other businesses in the real estate industry. One of the main contributors is the ability of NLG to attract investment from overseas investors. 

In 2019, ACB Securities Ltd projects NLG revenue to top VND 3,718 billion, increase by 7% compared to the previous year, of which 57% comes from the handover of Nguyen Son and Flora Novia projects and 22% comes from the transfer of 50% shares in Akari City project and 35 ha in Southgate project to strategic partners. Parent company estimated after tax profit is expected at approximately VND 995 billion dong (up by 30%) thanks to the VND 400 billion dong of profit from Mizuki Park project.

As a result, ACBS repeated its recommendation to buy NLG shares with a target price of VND 41,620 per share due to the increase in selling price of Akari City and Southgate projects.