AST – A new chapter begins – Update

• In 4Q22, AST posted VND18bn in NP vs. VND16bn net loss in 4Q21. FY22 NP reached VND23bn, fulfilling 77.2% of our FY22 forecast.
• We expect AST’s NP to surge 931.6%/12.5% yoy to in FY23-24F mainly thanks to the recovery of international air traffic.
• Reiterate Add with unchanged DCF-based target price of VND85,700.

4Q22 results: strong recovery thanks to the return of int’l visitors

4Q22 revenue hiked 674% yoy as total pax through Vietnam airports hiked 534% yoy in which (1) domestic pax hiked 407% yoy and (2) international pax hiked 60 times yoy, bringing 4Q22 NP to reach VND18bn vs. VND16bn net loss in 4Q21, helping FY22 NP to reach VND23.1bn, thus AST is eligible to continue listing on the main bourse. Moreover, on a qoq basis, although 4Q22 domestic pax dropped 36.4% qoq, 4Q22 international pax still increased 8.2% qoq, helping 4Q22 revenue/NP to increase 16.8%/39.6% qoq, reinforcing the fact that AST’s results are highly correlated with the recovery of international passengers.

FY23-24F outlook: entering a phase of strong recovery and growth

Most recently, Vietnam has been on a list of countries that China will conduct a pilot program of reopening the group tours from 15 Mar 2023. China accounts for the largest market share of Vietnam int’l pax in the pre-pandemic period (34%), thus we believe in the great recovery prospect of int’l visitors to Vietnam from 2Q23F, bringing Vietnam’s international pax to hike 2,075% yoy to 36.9m pax in FY23F (87.9% of pre-pandemic level), then continue to increase 12.2% yoy to 41.4m pax in FY24F (98.6% of pre-pandemic level). Additionally, we expect domestic pax to increase 15.8%/7.3% yoy to 100.7m/108m pax in FY23-24F following current growth momentum. As AST’s same store sales growth has a high correlation with the growth of Vietnam total pax, especially international pax, we expect AST same store sales to increase 168.6%/14.9% yoy in FY23-24F, helping AST’s revenue to grow 169.5%/18.9% yoy in FY23-24F. We also expect gross margin to come back at pre-pandemic level at 54% in FY23-24F, which will boost AST’s NP to grow 931.6%/12.5% yoy in FY23-24F.

Lower FY23-24F EPS by 10.1%/5.6%

We reduce FY23-24F EPS forecast mainly due to (1) lower FY23-24F gross margin by 2% pts – 5% pts to adjust in-line with FY22 cost structure, lower deposit income as AST has to spend much more to restore business activities, and (3) lower income from VinaCS (catering services) as the airlines still face difficulties.

Reiterate Add with a target price of VND85,700

Re-rating catalysts include (1) visa policy between China and Vietnam is fully restored, (2) new stores opening and same-stores sales grows strongly. Upside risk is the expansion into new terminal airports. Downside risks include (1) visa policy between China and Vietnam is restored slower-than-expected, and (2) growing competition from the downtown duty-free store.

Please follow this link for the full report