ACV – Awaiting a bright outlook – Update

• ACV posted VND684bn in 1Q21 NP, fulfilling 16% of our FY21F forecast.
• With the aggressive of Covid-19 vaccination, we believe Vietnam’s international sky will be safely re-opened by end-3Q21.
• Reiterate Add with unchanged TP of VND87,500.

Financial income saved 1Q21 net profit
In 1Q21, ACV’s revenue fell 47.4% yoy to VND1913bn as total pax throughput slumped 31.0% yoy, in which domestic pax dropped 10.6% yoy due to the Covid-19 outbreak in 2021 Tet holiday while international pax tumbled 99.0% yoy due to the frozen international air travel. Due to the huge fixed cost, gross profit fell more sharply at 78.2% yoy. As financial income surged 40.9% yoy mostly due to FX gain from 6.4% depreciation of JPY against VND in 1Q21, 1Q21 net profit only fell 55.8% yoy to VND684bn, fulfilling 15.7% of our FY21F full-year forecast.

Qualified opinions to be eliminated
Since 1Q21, ACV has started to consolidate the airfield assets’ results instead of recording them in account receivables and account payables as before. With the new accounting treatment, we believe ACV’s qualified opinions to be eliminated in its audited financial reports from 2021 onwards and ACV is on track to list on the main bourse in 2022F, which is the main factor to help ACV’s price to be re-rated.

Race to fight the pandemic and return to the international skies
Based on batches of vaccine expected to be received, we expect 14.66%/26.02% of the Vietnam population to be fully vaccinated by the end of 3Q21/4Q21. Along with higher vaccination rates in Vietnam’s key international air traffic markets, we believe Vietnam may re-open the international skies by end-3Q21 as expected.

Conservative plan for FY21F
ACV set a target of VND5,025bn in pre-tax profit (+151.3% yoy) for FY21F which is equivalent to 93.0% of our FY21F forecast. We believe ACV could record more positive results as Covid-19 vaccination are urgently deploying in Vietnam and the prospect of safely re-opening Vietnam’s international sky is not far away.

Reiterate Add with unchanged TP of VND87,500
Our TP is based on DCF valuation with the WACC estimate of 8.9%. Downside risks include: (1) the Covid-19 outbreak in May-2021 might get out of control leading to lower-than-expected domestic passenger throughput (according to CAAV, total domestic flights in 19/4/2021-18/5/2021 rose 134.5% yoy but declined 15.8% compared to the period of 19/3/2021-18/4/2021, (2) a stronger-than-expected JPY vs VND and (3) slower-than-expected construction of LTIA.

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