Real estate developers bypassed the sluggish property market last year to record steady profits from construction rather than rentals and such.


Construction Joint Stock Company No. 5 (SC5) made VND34.9 billion in after-tax profit last year, mainly from building under contract.


The company is forecasting a net profit of VND46 billion (US$2.58 million) for 2009 and reckons that contract construction will deliver VND36 billion of the final figure.


With registered capital of VND103 billion, SC5’s earnings per share now stands at VND4,000.


The current share price of around VND50,000 gives the company a tempting price/earnings ratio of 12.5.


SC5 owns quite a few commercial buildings that promise to generate substantial returns as the property market picks up.


At present the company is putting up an apartment building in Binh Thanh District’s Ward 21, and plans are afoot for several more developments.


Next month SC5 plans to start building expensive apartments near Thu Thiem Bridge in Ward 22 of the same district.


Further down the track, the company has scheduled a third-quarter start to construction of 1,000 inexpensive apartments with a budget of VND500 billion and the My An Apartment Building for low-income earners with a budget of VND150 billion, both in Thu Duc District.


The company also owns four hectares of prime land in rapidly urbanizing District 9.


Another promising candidate for healthy returns is Saigon General Service Corp. (SVC), which listed on the Ho Chi Minh Stock Exchange last month.


The company plans to start building a VND800 billion shopping center with offices for rent in downtown HCMC later this year. Savico Plaza on Ho Tung Mau Street, District 1 will occupy 3,100 square meters of land.


SVC is already undertaking several construction projects in the middle of HCMC, among them a seven-story office building at 91 Pasteur Street and a hotel on Ly Tu Trong Street.


Away from the center of town, the company is building an office tower on Le Minh Xuan Street in Tan Binh District.


With the recent stock market surge, SVC will likely take back the VND121 billion loss provision made last year when its share portfolio was ravaged.


On its website, SVC says it made a net profit of VND12.3 billion in the first four months of the year, equal to 22.57 percent of the 2009 forecast. Its P/E is 14.2 and EPS is VND2,749.


“We think investors should buy real estate development companies that already own plenty of land. They should see robust growth this year,” VNDirect Securities told Dau Tu Chung Khoan (Securities Investment) newspaper.


The property market is picking up on the back of the rallying stock market, according to Dinh The Hien, director of the Institute of Informatics and Applied Economic Research.


“Investors who bought stocks early this year have taken large profits and are putting them into property, which is more attractive than bank deposits or gold,” Hien said.


VietNamNet, TN