How we value Real Estate stocks
Model: RNAV + DCF Blend
Real estate developers in Vietnam report land banks at historical acquisition cost (Vietnamese Accounting Standards don't allow revaluation). This means book value severely understates true asset value. This model blends two approaches: an RNAV proxy (revalued net asset value, applying a 1.5x factor to book value) weighted 40%, and a DCF on normalized cash flows weighted 60%. Highly leveraged firms receive a +2% WACC penalty.
Why this model
RE developers carry large land inventories at historical cost under VAS; cash flows depend on project delivery timing. RNAV captures hidden land value, while DCF captures earnings power. The leverage screen protects against over-leveraged developers (a common risk in Vietnam's property market).
How it is calculated
RNAV proxy: BVPS x 1.5 revaluation factor. DCF: 10-year projection on median FCF with CAPM-derived WACC. If D/E > 3 or interest coverage < 1.5, WACC is increased by 2%. Final value = 40% RNAV + 60% DCF.
Best suited to
Property developers and real estate firms with significant land banks recorded at below-market historical cost.