Phat Dat Real Estate Development : Fitch affirms Phat Dat’s idr at ‘b’, outlook stable

Fitch assigns a 'B' rating to the long-term Issuer default ratings (LT IDR) of Phat Dat Real Estate Development Corporation (HoSE: PDR), which reflects PDR's healthy financial indicators and the position of a strongly-growing property developer in Vietnam. By actively participating in this credit rating, PDR showcases its strengthened creditworthiness and increased transparency in line with international standards. The new advance allows Phat Dat to diversify its financial sources and issue international bonds, serving the medium- and long-term capital demand in the next growth-acceleration phase.

Dual headquartered in New York and London, Fitch Ratings hails from over 100 years of experience assessing and providing credit ratings to nations, enterprises, and investors worldwide. Fitch Ratings is one of the Big Three largest and most reputable credit rating agencies accredited by the U.S. Securities and Exchange Commission. In April this year, Fitch Ratings revised Vietnam's Outlook to Positive with a rating at 'BB,' reflecting Vietnam's growth resilience and the nation's efforts to maintain macroeconomic stability. Fitch Ratings assesses that Vietnam expects strong demand for residential properties in the medium term, supported by domestic economic growth, high urbanization, rising incomes, and the growing middle-class population.

The position of the leading property developer in Vietnam with excellent internal capabilities

Fitch's credit rating result reflects Phat Dat's market position as a leading real estate developer in Vietnam.

Thanks to the wholesale strategy, Phat Dat distributes all products to partners to expand market reach and reduce operating costs while enabling the enterprise to focus on property development. In addition, the wholesale model gives certainty to PDR's cash flow and profit plans by offering controlled progress of inflow collection from wholesale buyers. In 2020 and 2021, with impressive business results amidst the impacts of the Covid 19 pandemic, Phat Dat demonstrated the stability of its development strategy and operating model. In 3Q2021, Phat Dat continued to record a growth in business results with a pre-tax profit of over VND 760 billion, up 37% YoY, boosting the cumulative pre-tax profit for the nine-month period to VND 1,397 billion, up 55% YoY.

In terms of financial indicators, the Company's financial leverage and indicators remained at a safe level. The Debt/equity ratio decreased from 0.52 times of the same period last year, currently standing at 0.28 times. Equity and total assets both increased sharply. ROA and ROE reached 8.2% and 20.8%, respectively, higher than the industry's average. Advances from customers were twice as much as at the beginning of the year, reaching nearly VND 1,580 billion.

Phat Dat's Leadership believes in the Company's continuous impressive business performance in the fourth quarter to surpass the year's plan. Phat Dat has gradually realized the New Era strategy with the 5-year pre-tax profit targeting VND 14,270 billion, equivalent to a compound annual growth rate (CAGR) of 51% for 2019 - 2023.

Potentials for sustainable development based on the well-maintained financial indicators,

According to Fitch's assessment, Phat Dat has shown remarkable growth through the strategy of product diversification and market expansion. PDR has evolved from being a high-rise developer in Ho Chi Minh City to selling a mix of high- and low-rise homes and moving into second-tier cities. By embracing such a strategy, Phat Dat benefits from the trending demand for residential real estate in potential markets in the next 5-10 years.

In the process of sourcing and acquiring landholdings in developing localities with good infrastructure and open policies to businesses, Phat Dat focuses its investment in prime locations with connected transportation networks and compliance with legal procedures through projects compatible with market needs. Currently, Phat Dat owns 768 hectares of land bank stretching across Da Nang, Binh Dinh, Quang Ngai, Ba Ria - Vung Tau, Binh Duong, HCMC, Phu Quoc, etc. In the future, Phat Dat Dat will continuously develop new landholdings to bolster its position in the market as well as maximize its project development capacity, pursuing the targeted breakthrough growth in the New Era.

Besides the strong growth in revenue, Fitch emphasized that Phat Dat's net debt/inventory sustained healthy at 28% in 2020 and is expected to range from 20% to 30% in the period 2021-2023, well below 40% - the safe level to maintain Fitch's credit rating.

The report also pointed out that PDR had raised VND1.38 trillion by the end-September 2021 from the domestic bond market. As assessed by Fitch, given improved net inflows and low debt levels in the medium term, the Company can fully tap external capital sources to fund its land purchases in the coming years.

Opportunity to access new capital sources and maintain strong growth momentum

ADB speculates Vietnam's bond market with a lack of reputable credit rating agencies to push operational efficiency in terms of investment supply and demand and to help investors be better aware of the financial position of bond issuers in the market. Thus, by actively participating in Fitch's credit rating, PDR demonstrates transparency and objectivity while operating, performing its responsibilities and commitments to its investors, and complying with legal provisions. Fitch's credit rating result is an essential prerequisite for Phat Dat to participate in the international bond market eligibly. Fitch Ratings recognizes Phat Dat with the need for extensive capital sources to fund land bank expansion and project development in the coming years. Hence, the listing and issuance of bonds in the international market enable Phat Dat to access capital sources with proper interest rates, diversify investment capital structure, and ensure the medium- and long-term stability for the next growth-acceleration phase.