AIRLINE stocks may ride a rising wave this year with the debut of budget airline Vietjet on the Ho Chi Minh Stock Exchange later this month, in a scenario similar to the impact of Sabeco’s 2016 listing on of beer stocks in general.
Vietjet will put its entire 300 million shares on the HCM City bourse on February 28 at the starting price of VND91 (Bt140) per share in the first, most expected initial public offering in 2017, which values the low-cost carrier at US$1.2 billion (Bt42 billion).
On the over-the-counter market, Vietjet’s shares have been purchased at VND20,000 apiece.
Investors expect share prices to soar after the official listing, just as it happened to beer makers Habeco and Sabeco.
The price of Habeco shares shot from the debut price of VND9,000 to VND25,000 a share in just two months on the Unlisted Public Company Market in December. Sabeco’s shares soared from VND11,000 on its debut day of December 6 on the HCM City exchange to VND16,000 this week.
Vietjet’s listing is expected to provide fresh impetus to airline stocks as well as the stock market as a whole.
A total of nine airlines and aviation-related service companies are currently listed on three exchanges, with trading on the UPCoM. These include national flag carrier Vietnam Airlines and Airports Corporation of VietNam.
Only three companies are listed on the two official exchanges: No Bai Cargo Terminal Service JSC on HOSE; and Da Nang Airports Services JSC; and General Aviation Import Export JSC on the Ha Noi exchange.
“There could be a spill-over effect on other stocks after the Vietjet’s listing, like what happened to beer stocks in the end of last year,” said Nguyen Xuan Binh, deputy head of analysis at Bao Viet Securities Co.
Airline stocks are expected to attract investors given the bright prospects seen for the local aviation industry as a growing economy, rising middle class and deepening international integration creates rapidly rising demand for air travel, Binh said.
In its report last year, the International Air Transport Association forecast that Vietnam’s aviation industry would be among the five fastest growing markets in the world by 2035.
“The majority of the market shares are in the grip of a few major airlines. Thus, their positive business prospects will likely attract cash flows,” Binh said.
Shares of Vietnam Airlines have climbed over 51 per cent since its debut on January 3, while that of the Airports Corporation of VietNam has doubled since its listing on November 21 last year.
The reference price of Vietjet was set based on the average price-earnings ratio of 11.52. With the daily trading limit of 20 per cent on either side, the aviation company’s share price could range between VND72,000 and VND108,000 per share on the first trading day.
Vietjet reported record revenues of VND27.5 trillion in 2016, up 39 per cent year-on-year. The net profit of the parent company was VND2.3 trillion. It has targeted a profit of nearly VND3.4 trillion in 2017.
Meanwhile, Vietnam Airlines estimates its profit hit a record VND1.6 trillion in 2016, a five-fold increase over the previous year. Its total revenues reached VND59 trillion. In 2017, it targets lower profits at nearly VND1.2 trillion, based on expectations of volatile oil prices.
In the medium and long term, Binh said local airlines may face stiffer competition from other international airlines which|could weigh on their earning prospects.