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SCS - Standing at the turning point of life

SCS's long-term growth depends on the operator selection at Long Thanh International Airport (LTIA). We outline two scenarios. We outline two scenarios: Not Selected (Scenario 1) and Selected (Scenario 2) into LTIA. Using the cash flow discount method (FCFF), the target price for the two scenarios is 66,200 VND/share and 109,500 VND/share, respectively. We recommend OBSERVE with the goal of helping investors to be informed, make objective judgments and make decisions when official information is released.
• International cargo operations from Tan Son Nhat Airport (TSN) will gradually shift to LTIA, creating two turning points for SCS’s long-term growth potential:
o Scenario 1: SCS is not allowed to operate at LTIA, leading to a market share decline to 10% by 2027 (-9 pps from 2027), with operations limited to low-cost carriers at TSN. Revenue is projected to decline at a CAGR of -7% in the 2025–2029 period.
o Scenario 2: Participation in LTIA allows SCS to retain international customers and cargo volume, maintaining a stable market share of 19% during 2025–2029. Revenue is projected to grow at a CAGR of 12% over the same period.
• Profit margins are expected to narrow in the long term but remain at a high level
o Gross margin is projected to decline starting in 2027. In Scenario 1, the average service price decreases due to lower share of international cargo. In Scenario 2, SCS must pay an exploitation concession fee to the investor, assumed at 4.5% of revenue.
o The CIT rate will rise to 20% from 2025 following the expiration of the incentive period. For 2025, the net margin is expected to reach 61% (-6 pps YoY). In the long term, the net margin stabilizes at 59% in both scenarios due to the narrowing gross margin described above.
For 2025, revenue and NPAT are forecast to reach VND 1,153 bn (+11% YoY) and VND 698 bn (+1% YoY), respectively. The corresponding EPS is 6,512 VND. In the long term, the CAGR of NPAT in the period 2025 – 2029 for Scenario 1 and Scenario 2 is -9% and +10%, respectively, reaching VND 464 bn and VND 1,021 bn in 2029.
Risks to recommendations
• The timeline for LTIA’s operational launch may be delayed beyond expectations.
• A global trade war during President Donald Trump’s second term may reduce demand for investment in electronic components and cross-border procurement.