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ACV – LTIA phase 1 to catalyse revenue in FY26F – Update

Company Note 24/11/2020    347


  • The prime minister assigned ACV as the main developer of Long Thanh International Airport (LTIA) phase 1.
  • We expect the US$4.3bn project to drive ACV’s revenue growth from 2026 onwards.
  • We reiterate our Add call with a higher TP of VND88,200 after taking the impact of LTIA into account from FY26 onwards.

Market price

Target price

Dividend yield



VND 74,500

VND 88,200




3Q20 results were lower than our expectation

Airport Corporation of Vietnam’s (ACV) revenue fell 68% yoy in 3Q20 following a 21.3% yoy decline in total pax throughput. International flights were still frozen while domestic travel’s recovery was disrupted by the 2nd wave of Covid-19 in Jul-Aug 20. Thus, domestic pax throughput declined 31.6% yoy in 3Q20. NP fell 93.6% yoy to VND141bn in 3Q20, compared with a net loss of VND394bn in 2Q20. Net profit fell 76.8% yoy to VND1,369bn in 9M20, below at 56.4% of our full-year forecast.

LTIA officially put on the table

In Nov 2020, the Prime Minister assigned ACV as the main developer of Long Thanh International Airport phase 1. This US$15bn international airport is a mega project, with total capacity of 100m pax throughput and 5m tonnes cargo per annum. Phase 1 of the project can serve 25m pax throughput and 1.2m tonnes cargo per annum. The investment cost of phase 1 was estimated by ACV at about US$4.3bn (VND99,000bn). ACV expects to start construction of phase 1 in Dec 20 and complete it in FY25F. Our forecasts now include the impact of LTIA in terms of capex and revenue prospects.

Entering a peak capex cycle

ACV plans to fund LTIA phase 1 with US$1.5bn internally-generated funds and US$2.7bn of debt. Thus, we expect interest income to drop significantly to -44.3% CAGR in FY20-25F, which will hurt bottom line (interest income contributed 16%/17%/79% to FY18/19/20F’s pretax profit). We estimate ACV to raise about VND60,000bn via bank borrowings or bond issuance. This would increase the D/E ratio from 0.4x in FY20F to 1.3x in FY25F.

Reiterate Add with a higher DCF-based TP of VND88,200

We cut FY20-22F EPS forecasts by 9.0-22.8% to reflect lower traffic assumptions and lower net financial income. We lift our DCF-based TP to VND88,200 due to 1) lower total EBITDA of FY21-FY30F to factor in mid-term cash burn period, 2) WACC decreased from 12.56% to 8.9% to reflect higher debt/equity, and 3) increased LT growth rate from 4% to 4.5% to represent better growth potential after FY30F due to LTIA. Downside risks include 1) a longer-than-expected Covid-19 pandemic, 2) slower-than-expected construction of LTIA. Re-rating catalyst is faster than expected Covid-19 vaccine development and distribution.

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