We lower our target price (TP) for AST by 5.7% to VND64,700/share but maintain our OUTPERFORM rating as the company’s share price has declined by 11% over the last four months.

Our lower TP is mainly driven by our lower valuation for AST’s air catering business as we shift from using the price-to-sales ratio (P/S) to using the price-to-earnings ratio (P/E) for valuation, which is partially offset by our higher DCF valuation for AST’s core businesses (i.e., airport retailing & services and hospitality) and mainly driven by rolling our TP horizon forward to end-2023.  

In 2022, we forecast AST to make a marginal profit of VND10bn due to (1) a recovery in revenue that is mainly driven by the airport retail segment increasing 3.2x YoY in our projection and (2) improved profitability with forecast gross margin of 52% vs 28% in 2021.