Sembcorp Industries’ business in Vietnam is expected to play a key role in sustaining the firm’s growth trajectory as the country emerges as one of the key benefactors to the US-China trade dispute, through its 49%-owned subsidiary VSIP, according to an analyst report by CGS-CIMB.
“Urban development is in a sweet spot to ride on the potential rise in MNC investments in Vietnam as a result of the trade war. In the past two years, Vietnam has been a preferred location in ASEAN over Thailand and Indonesia for its relatively stable currency, social sentiments and politics,” said Siew Khee Lim, an analyst at CGS-CIMB.
The urban development division generated $86m of Sembcorp’s net profit in FY18, with Vietnam and China contributing 90% of urban development net profit. Growth prospects can be sustained on the back of 504 hectares of order book (deposits paid) in urban development to be recognised over the next 2-3 years. Furthermore, the management targets to sell 200-300 hectares of land pa, with the need to replenish 1,000 hectares of land pa.
VSIP has 7,409 hectares of landbank (c.2,500-hectare sellable land) dedicated for integrated township and industrial park development. The report noted that Sembcorp’s 55% owned condominium Habitat, located within VSIP I, has seen an approximately 40% surge in average selling price since 2017 to US$1,400 psm as demand continues to pick up.
In addition, Sembcorp is currently developing Sun Casa (383 units) in VSIP II, which is expected to be completed in 2020.
Sembcorp is a leading energy, water, marine and urban development group operating across five continents worldwide.
