- We reiterate our BUY rating but trim our target price (TP) by 1.1% to VND163,700/share, implying a projected total stock return (TSR) of 28.4%, inclusive of a 6.7% dividend yield.
- Our lower TP mainly reflects an extension in our DCF-based valuation to 2026F from 2025F previously, which is in order to capture our initial assumption for the new Long Thanh International Airport (LTA). We conservatively assume that SCS’s cargo volume will plunge 30% YoY in 2026F due to the potential relocation of flights from SGN to LTA.
- However, the negative impact of this assumption is largely offset by a 2-ppt reduction in our WACC as we lower SCS’s beta from 1.0x to 0.8x to align with the past two years of weekly data.
- We trim our 2021F NPAT-MI forecast by 3.4%, which is mainly driven by a 2.6% cut in international cargo volume and 4.2% cut in domestic cargo volume for the year. Meanwhile, we broadly maintain our NPAT-MI forecasts in aggregate for 2022-2025F.
- In 2021F, we forecast revenue of VND792bn (USD34mn; +14% YoY) and NPAT-MI of VND556bn (USD24mn; +20% YoY). The revenue growth forecast is mainly driven by our cargo volume growth assumption of 9.3% YoY and estimated ASP growth of 5.6% YoY in 2021F.
- We maintain our bullish view on SCS thanks to its strong balance sheet and sustainable duopoly market position as well as its attractive valuation with a 2020-2023F PEG of 0.7x. We believe SCS is well-positioned to maintain its financial health and achieve resilient earnings growth — even if disruptions from COVID-19 continue beyond our expectation.
- Downside risks to our positive view: Lower trade flows; airport capacity constraints at SGN.

We believe successful entry to LTA could be a significant positive catalyst for SCS. We currently assume SCS’s total cargo volume will plunge 30% YoY in 2026F to 245,000 tons (equivalent to around 104% of its 2021F total cargo volume) due to the potential relocation of flights from SGN to LTA in 2026F. Airports Corporation of Vietnam (UPCoM: ACV) has indicated that SGN will maintain a certain market share of passengers after LTA is launched as both airports are under the operation of ACV and each airport has its own advantages. We believe our current assumption is conservative as SCS management is confident in the company’s competitive ability to expand its operations to LTA due to its large international airline client base and support from ACV as a 15% shareholder. 

COVID-19 to slow SCS’s cargo volume growth in the short term. Currently, Vietnam has implemented social distancing measures in provinces/cities experiencing COVID-19 outbreaks, including HCMC. We believe SCS’s cargo volume will be negatively affected in Q3 2021 due to disrupted manufacturing activities and a muted number of passenger flights at SGN. We assume that Vietnam will contain the current COVID-19 situation in Q3 2021. According to SCS, this wave of COVID-19 could decline its cargo volume by around 20%-30% QoQ in Q3 2021; however, air cargo transport is normally preferred when the economy restarts thanks to its timing advantages. We therefore cut our SCS cargo volume assumption in 2021F by 3%.