ACV – International passenger numbers surge, China’s tourism recovery strengthens

We attended ACV’s online AGM on May 31. Our key takeaways are as follows:

2024 guidance:

Total revenue: VND20.3tn (USD813mn; +2% YoY; 84% of our 2024F).
PBT: VND9.4tn (USD375mn; +6% YoY; 86% of our 2024F).
Total passengers: 114 million (+1% YoY; 98% of 2019’s level; including Danang and Cam Ranh international terminals).

These targets are in-line with our expectations. Although ACV’s 2024 PBT target is only 86% of our 2024F, we believe ACV has set a conservative guidance, which follows its track record.

ACV’s 2024 guidance

	2019	2023	2024F	2024G
Passengers (million)^	116	113	121	114
International passengers^	42	33	43	41
Domestic passengers^	75	81	78	72
Total income (VND bn)*	N/A	20,033	24,242	20,352
PBT (VND bn)*	N/A	8,870	10,945	9,378
NPAT (VND bn)*	N/A	7,339	10,175	N/A

Source: ACV, Vietcap forecast. Note: (^) Including international passengers in the Danang (DAD) and Cam Ranh (CXR) international terminals; (*) Excluding contribution from State-invested aviation assets— the State authorizes ACV to manage these assets (including runways).

Management is optimistic about international passengers’ recovery. ACV projects approximately 41 million international passengers in 2024 (+23% YoY; 95% of our 2024F; including Danang and Cam Ranh international terminals). According to management, China’s outbound tourism has recovered stronger in Q2 2024, reaching 93% of the pre-COVID level. For domestic passengers, ACV forecasts 72 million (-10% YoY; 92% of our 2024F) due to aircraft repairs by domestic airlines. Specifically, 15 A321 aircrafts, the mainstay of domestic airlines, were overhauled in January 2024, and the number is expected to increase to around 25 aircrafts during the peak summer period from July to August 2024.

In 4M 2024, international passengers hit 14 million (+45% YoY), which we attribute to favorable visa policies and attractive 2024 tourism stimulus packages. Domestic passengers reached 23 million (-15% YoY), mainly due to aircraft repairs by domestic airlines.

Construction progress of Tan Son Nhat Airport’s (SGN) new terminal and Long Thanh International Airport (LTA) is on track. Specifically, ACV targets Tan Son Nhat Terminal 3 to come into operation on April 30, 2025, and LTA’s sub-project No.3 to come into operation in September 2026.

ACV will sign credit contracts for a loan of USD1.8bn on June 1. The borrowing is from three State-owned banks - Vietcombank, VietinBank, and BIDV, with a loan term of 20 years. The collateral for the loan will be the assets formed from the project, including those permitted for a mortgage, whether these assets currently exist or will be created in the future. Additionally, ACV plans an additional borrowing of VND6tn in 2024 for Tan Son Nhat Terminal 3 and Noi Bai Terminal 2, and is seeking for a suitable lending partner, according to management.

ACV intensifies debt collection. ACV has signed commitments with airlines to repay debt according to a schedule. In 2024, ACV expects VND500bn (vs VND2.5tn of 2023; VND1.6tn of our 2024F) of provisions for bad debt. Additionally, ACV has worked with airlines on mechanisms to prevent further bad debt.

Dividend payments: ACV will announce dividend payments in June or July, after having an official decision by the Government to amend Decree 140. ACV wants to pay dividends in stocks so that its profit can be retained for project investment.