Nam Long's CEO: Possible M&A of hospital and school, even a company with similar vision

Nam Long aims to develop large-scale township of 40 - 50 hectares or more, but might also develop small projects from 1 hectare.

Nam Long Investment JSC (HoSE: NLG) has a recent change in management. Nguyen Thanh Son Prior to this appointment, Son used to be Nam Long’s CEO since 2019, former General Director of Vincom Construction Company - Vingroup Group, and former Deputy General Director of MIK Group.

Land fund development and housing business are identified as Nam Long’s two key businesses. According to Nam Long’s planning, in the next 3 years, these two segments are expected to have an annual growth rate of 85% in sales and 72% in revenue.

Nguoi Dong Hanh’s reporter had an interview with Son to get a clear understanding of Nam Long’s strategy for these two business segments.

Nguyen Thanh Son, General Director of Nam Long Land.

Developing townships of tens of hectares or more, but also doing projects of 1 hectare

- As the head of Nam Long's two core businesses, do you have any new plan to promote Nam Long’s township and housing businesses? What do you think are the potential and challenges of residential real estate in the current period?

- We have submitted the plan for township and housing development in 2021 to the Board of Directors for approval with projected revenue exceeding USD 500 million (approve VND 12,000 billion) and nearly 4,000 products along with the simultaneous deployment of 6 key projects and township. This requires a great deal of capacity for township development, horizontally and vertically. I think that the foundation of residential real estate business must be the quality, including service, worthiness, value added and community connection.

So far, Nam Long's products all focus on the real needs of residents, from pricing to accompanying facilities. Nam Long's projects may not be the most luxurious, but they must be valuable projects and services that suit the Vietnamese’s living needs. Only then can we create authentic townships that are the centers for living, working, education, entertainment and recreation in the area where the project is developed.

In regard to the housing business, access to clean land funds is a challenge not only for Nam Long but many other investors. However, as the market demand remains high and the market size needs to increase to 70 million m2 per year from now to 2030, I think that residential real estate still has great potential for development. It is essential that we develop in a sustainable way so that houses are built with enough quality and facilities for living, not turning into deserted urban areas. This is a shared problem for both investors and the government.

- Besides the existing land, what other key destinations Nam Long is planning to expand in 2021, and why?

- Nam Long currently owns 681 hectares of land in Ho Chi Minh City, Can Tho, Long An, Dong Nai and Hai Phong. In accordance with the infrastructure and social development planning of major cities and the Nam Long’s strategy in the next 10 years in consultation with Mckinsey, Hanoi and class II cities such as Ba Ria - Vung Tau, Binh Duong, Nhon Trach (Dong Nai), Bac Ninh, Hung Yen and Quang Ninh will be the new key areas. We identify these as areas and cities with potential for economic development, attracting a large workforce with massive housing demand. Nam Long has evaluated the feasibility of an integrated township in these areas to be fully occupied and operated with associated facilities and services, creating real value for the area. that I invest. In the next 10 years, Nam Long will spend about VND 2,000 billion per year to acquire new land.

- Nam Long is developing large townships of 40 - 50 hectares, even several hundred hectares instead of 10 hectares like in 2015 - 2020. Why is Nam Long aiming for large townships? Is it the company's strategy to increase the scale of the project and does it affect M&A deals?

- As I’ve mentioned, Nam Long aims to develop large-scale townships, including small components projects that belong to the master plan. When there is a master plan, the township will be built with complete functionality, not only for living but also for education, shopping and entertainment. Developing such ecosystems is Nam Long's third core business and will be seriously invested in the coming years. Investors will generate stable profit through non-residential real estate to reduce all possible market risks and ensure sustainable business growth.

I do not think that increasing project size will affect M&A deals. On the contrary, we will have more selections in our basket, as each investor has their own advantages and core businesses. We will not stop at M&A projects, maybe in the future we will M&A hospitals, schools, shopping malls, or even some companies.

- The land availability in some major cities such as Hanoi and Ho Chi Minh City does not seem to match the size that Nam Long desires. So what is Nam Long's development strategy?

- Besides townships, Nam Long still develops small projects with a size of 1 hectare. A hectare is enough for Nam Long to build basic facilities for customers. We prioritize their living quality. With each location, Nam Long will choose products that suit local resident’s needs and income, perhaps Ehome, Flora, Valora, etc. However, as land becomes limited, we might expand our customer base to a higher segment with a new product line that will be launched in 2021. We hope it will be well received by the market.

- Having said that, Nam Long recently also resold some land in Dong Nai for profit. What is Nam Long's land development strategy, building a large land fund for long-term project development or buying and selling for instant profits?

- The general market now understands that M&A of land is acquiring and selling for profit but that is not what Nam Long is doing.

Making Land Development as our core business means that this brings real value to us and also our partners. Many companies have the financial resources to buy and sell real estate but only a few can develop real estate from a piece of land to an entire township, especially when the Vietnam real estate market is still young, only 20 year old.

Land Development with NamLong is buying and adding value to that land with our 30-year experience. We do legal work, infrastructure development, and planning. When a partner acquires the land, they can continue to develop with their own capabilities without needing the entire system.

We believe that this is a business that is profitable and valuable, making use of our strengths as well as acquiring more strategic partners to exchange experience and "quintessence" in development of high valued townships for the community. Depending on timing, we will choose between M&A and self-development, whichever is in favour of Nam Long’s shareholders.

- What is Nam Long’s projected revenue and profit in the housing business in 2021? Which projects can be reported this year?

- This year, Nam Long expects revenue from housing and township development to be more than VND 5,000 billion, profit of about VND 550 billion (including the joint venture without merging into the company). Projects that can be accounted for this year are component projects of Southgate (Waterpoint phase 1), Akari City, Mizuki Park, Flora Novia and Nam Long - Can Tho.

- In the period of 2021 - 2022, what is Nam Long’s expected total sales? What is the ground for such a number?

- We have an ambitious growth plan for the 3 core businesses in the next 3 years. For housing, township and land development in particular, the opening sales value could break the record at VND 26,000 billion. I have a strong foundation and belief in the capability of my team. First of all, Nam Long has an existing land fund of 700 hectares at key economic locations. Secondly, the number of pre-orders is quite good, usually twice the amount of products we plan to sell. Thirdly, we are enhancing the capabilities of our internal team and improving the professionalism, to improve the speed, efficiency, and the quality of product development.

- Thank you for the conversation.

Source: Cafebiz