Vietnam's Kinh Bac City forecasts profit to rise on lower rates

TN News

Email Print

Kinh Bac City Development Share Holding Corp., Vietnam's third-biggest property firm by market value, said profit and revenue will rise this year because lower borrowing costs will allow it to access cheaper funds.

The company, based in Hung Yen province, is working on two scenarios, the first targeting net income of VND200 billion (US$9.6 million) and revenue of VND1 trillion, and the second a more "ambitious" forecast of VND600 billion of net income and revenue of VND2 trillion, Chairman Dang Thanh Tam said.

"This is quite a conservative plan, but since 2011 was very difficult, we need to be more cautious in any targets," Tam said in an interview in Hanoi on March 12. "We will have to wait to see how the company is doing in the first quarter and will decide on the final plan."

Kinh Bac's earnings recovery comes after lending interest rates in Vietnam surged to as high as 25 percent in 2011 as the central bank raised interest rates to choke off Asia's fastest inflation. The developer's net income dropped 96 percent to VND41 billion, while revenue fell 31 percent to VND633.5 billion last year, according to a company filing on the Ho Chi Minh City Stock Exchange's website.

Rate cuts

The State Bank of Vietnam cut the repurchase rate by 1 percentage point to 13 percent and lowered the refinancing rate for the first time since 2009 by the same amount to 14 percent, effective from March 13. Slowing price gains may allow the central bank to cut rates by 100 basis points each quarter, Governor Nguyen Van Binh said.

Tam said he expects lending rates to fall to as low as 16 percent in June and July if the economy remains resilient.

Kinh Bac, which operates industrial zones in and around the capital Hanoi and the northern coastal city of Haiphong, will submit the two earnings scenarios for shareholders approval at a meeting in April, said Tam. The company plans to attract more than $1 billion from foreign investors to its industrial zones this year, Tam said.

"We have been discussing with six to seven companies from Japan, Taiwan and Korea and they are just waiting to see Vietnam's economic indicators in the first quarter to sign contracts with us," Tam said. These companies, mostly operating in high-technology sectors, have shown "strong interest" in Vietnam, he added.

Kinh Bac's shares have rallied 37 percent this year, outpacing the 23 percent increase in the benchmark VN Index. Vietnam's inflation decelerated for a sixth month, with consumer prices climbing 16.44 percent in February from a year earlier, down from the previous month's 17.27 percent.

More Business News