- 2021-07-27T00:00:00
- Company Research
- 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. 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%. |