- AST released Q2 2021 results with revenue increasing 9.8% YoY to VND50bn (USD2.2mn) while NPAT-MI fell further into negative territory, reaching -VND32bn (-USD1.4mn) vs Q2 2020’s loss of VND13bn (USD560,000).
- For H1 2021, AST’s revenue was VND109bn (USD4.7mn; -55% YoY), completing 29% of our full-year forecast of VND373bn (USD16.2mn). In addition, the company incurred a loss of VND63bn (USD2.7mn) vs net profit of VND1bn (USD43,500) in H1 2020, completing 54% of our forecast for a loss of VND116bn (USD5mn).
- We attribute H1 2021’s negative results to (1) a drop in revenue across AST’s business segments — especially airport retailing as well as the company’s hotel and airport advertising — and (2) a margin contraction due to the severe impact of COVID-19’s resurgence in Vietnam on travel demand.
- As the COVID-19 situation in Vietnam continues to unfold unfavorably in Q3 2021, we see potential downside risk to our forecasts, pending a fuller review.

Retail business continued to suffer despite a glimmer of recovery prior to Vietnam’s fourth wave of COVID-19. In H1 2021, AST at the parent company level — which manages retail businesses at Noi Bai International Airport (HAN) in Hanoi — posted a loss of VND3.8bn (USD165,000) vs net profit of VND1.5bn (USD65,000) in H1 2020. We note that COVID-19 started to have an impact in March 2020, thus H1 2020 included two months of relatively normal operations for both domestic and international terminals. On the other hand, after a weak performance in Q1 2021 due to continued store closures, AST showed signs of recovery as same store sales at HAN in April 2021 recovered to 90% of the pre-COVID level. However, the resurgence of COVID-19 since May 2021 has taken its toll on AST’s store performance. In our estimation, AST’s two subsidiaries that mainly manage the retail business at Da Nang International Airport (DAD) and HCMC’s Tan Son Nhat International Airport (SGN) incurred H1 2021 losses of VND18bn (USD783,000) and VND6bn (USD261,000), respectively. Duty-free retail subsidiary Jalux also incurred a loss of VND4bn (USD174,000) in H1 2021.

COVID-19’s resurgence weighed on AST’s other businesses. As the number of domestic commercial flights slumped since beginning May 2021 and as international commercial flights remained restricted, AST’s catering associate VINACS experienced its fifth consecutive negative quarter since Q2 2020, which is reflected in AST’s losses from associates reaching VND9bn (USD391,000) in H1 2021 vs VND4bn (USD174,000) in H1 2020. Likewise, AST’s hotel business incurred a loss of VND29bn (USD1.3mn) in H1 2021, per our estimate. We attribute the loss from the hotel business to (1) the current fixed rental expense model that AST has with individual unit owners at the A La Carte Da Nang condotel and (2) COVID-19’s resurgence in Vietnam dampening hospitality demand.

Gross profit margin dropped to a record low. AST’s Q2 2021 GPM dropped to the lowest level in the company’s history, hitting 22.7% vs 42.9% in Q2 2020 and 27.1% in Q1 2021. AST’s H1 2021 GPM also contracted to 25.1% — much lower than our full-year 2021F GPM forecast of 35.9%. We attribute this low gross margin to lower selling prices at AST’s stores amid travel restrictions among provinces in Vietnam due to COVID-19.

Prolonged restrictions are eroding AST’s cash balance, but we believe liquidity is still sufficient to weather the current COVID-19 wave. AST’s H1 2021 cash flow benefited from support policies from suppliers, which was evidenced by (1) increased payables to suppliers of VND6bn (USD261,000) in H1 2021 vs decreased payables of VND81bn (USD3.5mn) in H1 2020 and (2) the fact that H1 2021 leasing costs dropped 42% YoY. As such, although AST incurred a net loss of VND63bn (USD2.73mn) in H1 2021, cash flow from operations was only -VND33bn (-USD1.4mn) vs a negative CFO of VND54bn (USD2.3mn) in H1 2020 when AST recorded net profit of VND1bn. As the pandemic prolonged, we believe the support policies that AST is currently receiving likely will not become more favorable, translating into a decline in cash balance  of VND213bn (USD9.3mn; -29% YoY and -8% QoQ) at the end of Q2 2021.