Global investors who seek exposure to the Vietnam stock market often do so via ETFs or Closed End Funds (CEFs) that hold the larger and more liquid companies. Such companies are usually prominent constituents on various Vietnam stock indices such as the VN-Index, FTSE Vietnam Index, MSCI Vietnam Index etc.
In this blog post I shall discuss one such large Vietnam stock, the Airports Corporation of Vietnam (UPCOM:ACV). I thought might be useful to regularly provide a broad overview of the stocks you might see pop up in fund manager holdings. The purpose is not to provide buy or sell recommendations. However a quick summary of key drivers for future performance will be the aim, and readers can make their own mind up of whether Airports Corporation of Vietnam is a good stock to buy?
WHY AIRPORTS CORORATION OF VIETNAM?
Airports Corporation of Vietnam might be a good stock for those who want to pick up an investment that still trades below the share price seen some 4 years ago. If owning this, you would be looking for a contrarian type play on the hope of increased travel soon.
When labelling it is a contrarian play, I should point out that we saw much cheaper levels during this pandemic such as the Delta surge in mid-2021, and more recently the scares around Omicron. Having said that, it may not be too late to get on board. I have noticed some good fund managers have it as a strong conviction pick still, and the forward earnings multiples look attractive.
AN OVERVIEW OF THE AIRPORTS CORPORATION OF VIETNAM (UPCOM:ACV)
Three key revenue sources.
Airports Corporation of Vietnam manages 22 airports across the nation. The 3 main segments consist of Aviation services which contributed more than three quarters of their revenue in 2020, then there are non-aviation services, and a lesser extent from commercial services.
We can simply think about what is required to services ourselves on a trip via an airport. We..
– check in our luggage
– go through airport screening
– use all the facilities needed in taking off and landing safely on the runway
– require parking and/ or bus travel services within the airport
Above is not a complete list but it illustrates that these services are not provided for free so think of ACV as the one clipping the ticket in Vietnam.
ACV picks up a much smaller percentage of revenue from non-aviation services such as making use of its overall terminal space capacity. Land leasing can be valuable and other corporations may find their facilities useful for office rental or advertising or other miscellaneous uses.
This refers to a lot of the stores you see at various airports and makes up a small fraction of ACVs revenues overall. Think of stores whether it be souvenirs or food & beverage outlets, ACV can generate profits from managing such stores themselves.
FACTORS TO DECIDE ON WILL AIRPORTS CORPORATION OF VIETNAM (UPCOM:ACV) SHARES WILL CONTINUE TO RISE IN 2022?
Recent reopening of Vietnam’s international air traffic – As soon as 2022 began international air traffic was “reopened”. I use the word loosely because at the beginning it started with only certain routes with caps in place. As I have also discussed on the blog recently, January this year was still relatively closed for many travellers in terms of issuance of visas and other logistics around obtaining flights in short supply and negotiating quarantine requirements etc.
The stock will be sensitive to such roadblocks to travelling being properly lifted. News has been promising of late on this front; however caution remains as we have run into plenty of left field problems in the last two years!
For example, when I say the news has been promising of late, mixed in with such news is you hear sometimes that tourism will open with various hassles / restrictions on travelers. So news flow can be fickle as I write this in early March!
Vietnam’s high vaccination rate should hopefully give international travellers some additional confidence.
Confidence of domestic air travel within Vietnam – Things have been more “free” travel wise in terms of domestic air travel this year. On the ground here it feels like life is getting more normal in living with the virus. Vietnam is still however dealing with an Omicron spike later than many parts of the world. If the experience elsewhere in the world is any guide, this should be more in the rear vison mirror by the month of May as case numbers should head down.
Infrastructure opportunity and HCMC stock exchange listing – You might have noticed in this post the stock ticker I indicated here reflects that ACV is not yet listed on the HCMC stock exchange like other large cap Vietnam stocks.
Without getting too bogged down into the complexities of the ACV balance sheet / accounting reporting requirements etc, it is technical in terms of its structure being used with the state capital asset and also how it can develop aviation infrastructure assets. Suffice to say that some analysts believe a more streamlined structure involving a HOSE listing is a positive catalyst for the stock going forward that can help with future financing arrangements.
One major infrastructure project for example is the Long Thanh International Airport, the second one near HCMC. Specifically it will be located about 40km from HCMC. It is a huge project and still probably more than 5 years away. ACV will need to ramp up its capability to fund as a result of this soon and hence my comments just above.
Cost controls – Management were perceived as doing a good job as the pandemic took hold with this company. Obviously this type of business was front and centre to it all, and they responded prudently with cost control measures. Analysts will be monitoring closely how they keep costs in check as travel hopefully improves especially in the back half of 2022.
AIRPORTS CORPORATION OF VIETNAM VALUATIONS – AIRPORTS CORPORATION OF VIETNAM PE RATIO, YIELD ETC.
Airports Corporation of Vietnam PE Ratio – 25 times (2022 forecasted)
Airports Corporation of Vietnam dividend yield – n/a
AIRPORTS CORPORATION OF VIETNAM SIZE IN TERMS OF VIETNAM STOCK INDEX AND COMPONENTS
Airports Corporation of Vietnam at the time of writing is about the 7th largest company of my searches of Vietnam stock list of the largest companies. The market cap in USD is circa $9 billion.
IS AIRPORTS CORPORATION OF VIETNAM A GOOD UNDERVALUED VIETNAMESE STOCK TO BUY FOR 2022?
At an initial glance the forecast P/E of circa 25 times for the stock for 2022 earnings may look pricey to some. We must remember though that this year, the “E” in the equation is still likely to be a depressed earnings year relative to any long run expected earnings figure.
The stock did start 2022 fairly well price wise, however perhaps investors still have not necessarily missed the boat to get aboard. In hindsight a purchase a few months back might have worked nicely, however now we have the benefit of at least seeing more concrete signs that Vietnam is indeed opening up to international travel. We can also observe many other parts of the world living with covid to a greater extent, compared to late last year when the Omicron strain created more uncertainty.
At the time of writing this in early March, I suspect the stock from around the 90,000 level can still do quite well over the longer term. Relative to other similar type of stocks across Asia, the forward earning multiples here look cheaper with ACV. On a price to book basis, it also is cheaper than peers. This is important to note as even though that is the case, I have seen analysts point out that the balance sheet may be undervaluing its asset base to some degree.
I have noticed in recent times that two fund managers I rate highly in Vietnam, the Pyn Elite Fund and the Vina Capital Opportunity Fund, have touted it as a likely outperformer in 2022. When I last checked these two funds have made it a strong bet in their concentrated portfolio investing approaches.
OTHER VIETNAM STOCK INDEX COMPONENTS REVIEWS
If you are interested in similar summaries and analysis on other larger Vietnam listed stocks here are some other links to check out.
And should you want a very quick description of the largest 10 companies listed on the Vietnam stock exchange, be sure to visit the below blog post I made last year.
VIETNAM LARGEST 10 COMPANIES ON STOCK MARKET
I summarize the largest Vietnam companies by market cap:
Is Vietnam a good investment?
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