ACV - Profit Growth Lower Amid Headwinds
ACV's share price movement is facing a number of challenges in the short term due to (1) slowdown in passenger traffic after consecutive years of high growth, (2) risk of being re-nationalized, following a recent proposal of the Ministry of Transport and (3) the HSX listing plan. However, we believe that the Government may not approve the shares buyback proposal soon due to the lack of an eligible mechanism.
Instead, we expect ACV will soon be approved to be responsible for using the revenue generated from airfield assets to invest in runway maintenance. Runway rehabilitation may have a temporary negative effect on revenue in 2020 (due to the runway closure). but will give ACV the opportunity to improve operational efficiency at key airports. In addition, we view the slowdown in passenger growth as a transition phase from high growth to more sustainable growth in the long term. Therefore, we remain optimistic about the long-term prospect of ACV.
We use the DCF method (WACC 11%; Terminal growth rate: 3%) to determine the fair value of ACV. We recommend ACCUMULATING for ACV with a target price of VND 78,000, implying a FY20F P/E of 26.5x and an EV / EBITDA of 13.7x.
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