Construction – Materials sector – Accelerating construction of Long Thanh Int’l Airport

• There are some signals that 5.10 package – the largest package (worth VND35,233bn) at Long Thanh International Airport (LTIA) will find its contractor in Aug 2023, setting a premise for the project to accelerate the construction progress.
• We believe that construction and stone companies will benefit the most in this theme

It’s time to accelerate the construction of LTIA

After many cancellations & extensions of bid invitations, the largest infrastructure construction contract in Vietnam – 5.10 – construction and equipment installation for passenger terminal building at LTIA finally re-opened the bid for the second time on Jun 12, 2023. According to the key investor – ACV, there are 3 consortiums of contractors participating in the bidding (vs. only one consortium in the first bid invitation). As those consortiums of contractors are foreigners with rich experiences and strong capability of executing construction projects, this important project is expected find its quality contractor and then start to kick off in Aug 2023, setting a premise to accelerate the construction progress.

LTIA will be a growth engine for construction and construction stone companies in 2023-26

With a large bidding package size as LTIA, any construction companies which participate in this project will be able to “leap and bounce” in the next few years. Furthermore, management of construction companies also share that investors’ initial capital for contractors in airport projects is usually 30-50% of the package value, higher than road projects (10-20%), thus supporting cash flow for contractors. For materials sector, we believe construction stone will take advantage from this project when the demand to mobilize is 18m m3, equivalent to 56% of the annual licensed mining capacity of Dong Nai province.

We believe VCG, C4G and VLB will be the most beneficiaries in this theme

Investment risk including:

• Construction sector: (1) package 5.10 continued to be canceled if bidders did not meet the requirements; and (2) rising material prices affect the gross margin of construction companies.
• Materials sector: rising input material prices and environmental resource tax affect the net margin of construction companies.

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