Is it time to accumulate aviation stocks?

VJC accounts for the second-largest international market share of Vietnam aviation industry.

However, looking to the future when the world, as well as Vietnam, will successfully control the COVID-19 pandemic, the aviation industry is forecasted to have a strong leap, especially in 2022-23F, when aviation companies will strongly recover and return to growth. Thus, VNDirect believes it’s a good time to start to accumulate aviation stocks for a medium-to-long-term investment prospect. It selects the best representatives of each segment with strong growth and strong catalysts in 2022-23F, including ACV, SCS, and VJC.

Airport Corporation of Vietnam (ACV)

In VNDirecto’s view, despite difficulties the company is facing in FY21F, ACV is still interesting for long-term investment horizon, based on:

First, solid recovery of business results in the coming years. For FY21F, due to the severe effects of two pandemic outbreaks, ACV’s net profit in FY21F may drop 61.0% YoY to VND638bn. For FY22F, thanks to the expected strong recovery of domestic pax (155.7% YoY) and international pax (1,843.6% YoY), ACV’s FY22F NP may surge 606.5% YoY to VND4,508bn.

Second, the possibility of listing on HSX in 2022F: management said they are working with the auditor to eliminate the qualified opinions in its audited financial reports, which helps ACV qualify for listing on HSX in 2022F.

Third, potential share dividend plan: the government has approved for ACV to retain its profit for re-investment. At the end-2020, ACV’s undistributed earnings are VND9,705bn, equivalent to a potential share dividend plan of 44% in 2021. We believe this is a strong catalyst for ACV in the coming periods.

Fourth, Long Thanh International Airport's growth potential.

Saigon Cargo Service Corporation (SCS)

VNDirect believed SCS’ air cargo volume market share in TIA would grow to 55% over the FY21-30F period, transforming it into Vietnam’s leading air cargo services provider, premised on its state-of-the-art terminal and it is the only provider capable of expanding capacity at TIA. It expects SCS’s performance to remain robust given its efficient cost control, strong balance sheet with zero debt, and a preferential 10% tax rate until FY23F.

Following the recovery, this stock company believed SCS’s upcoming quarter results would grow strongly on the low basis of FY20’s remaining quarters. It expects FY21F total cargo volume to increase 17.6% YoY with domestic cargo volume rising 19.7% YoY and international cargo volume rising 16.8% YoY in FY21F. It estimates SCS’s FY21F revenue/net profit would grow 21.8% YoY/26.5% YoY.

For FY22F, VNDirectw expects total cargo volume to increase 8.6% YoY with domestic cargo volume rising 6.9% YoY and international cargo volume rising 9.2% YoY, leading to the 16.7% YoY/15.5% YoY growth of FY22F revenue/net profit.

Vietjet Air JSC (VJC) 

VJC’s position as Vietnam leading low-cost carrier – accounting for the largest domestic market share of Vietnam with a domestic market share of 40% in 2020. VJC also accounts for the second-largest international market share of Vietnam aviation industry. Besides, VJC gained significant improvement in cash flow thanks to asset liquidation.

VNDirect forecasted FY21F domestic/international passengers to drop 41.2%/79.6% YoY but jump significantly in FY22F with volume growth of 160.5%/1,575.0% YoY. Along with the contribution of S&LB transactions and asset liquidation, it forecasts VJC may record a net profit of VND583bn/VND2,370bn in FY21/22F, equal to 30%/71% of the FY19 base level.