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Air transport ground service firms stand out amid pandemic

Since the first coronavirus cases were detected in Vietnam in March, the outlook for air transport-related stocks has remained negative.

After Vietnam faced the second wave of coronavirus in mid-July, some investors expressed concerns that air transport may never return to its pre-pandemic days.

In the air transport sector, airlines firms have seen their revenues decline sharply as the number of passengers falls due to travel restrictions across the world.

Shares in Vietnam Airlines (HVN) dropped to a one-year low of 17,800 VND (0.76 USD) on March 31, then bounced back thanks to strong domestic purchasing power, not because of improvements to its business performance.

Shares in Vietjet (VJC) have been even more volatile, falling to 95,000 VND apiece in late March and late July following reports of new coronavirus cases.

Though the two airlines have taken measures to cut costs and asked lenders to extend loan and curb interest rates, the situation seems bleak for them given the fact the virus has not been contained around the globe.

Unlike aviation companies, shares in Vietnam’s sole airport operator Airports Corporation of Vietnam (ACV) were being widely seen as positive in the long run, reported.

The company is authorised to run 22 airports in Vietnam, including nine international airports and 13 domestic ones. Those include key airports in major cities and provinces such as Hanoi, HCM City, Da Nang and Khanh Hoa. In the future, it is unlikely that a new rival will rise to compete with the company.

The monopoly given to ACV allows the company to control talks with service providers if they want to set up sales booths in its airports and prices are almost non-negotiable.

In the second quarter of 2020, ACV reported a net loss of 354 billion VND (15.2 million USD) as the company had to lower its rental fees for airport retailers, while it recorded a profit of 1.9 trillion VND in the first quarter.

But cash and cash-equivalent assets were worth 19 trillion VND on June 30 and this should be a great advantage for the firm, according to VietCapital Securities Corporation.

ACV shares (ACV) also dropped to 54,400 VND apiece on March 31 when Vietnam was hit with the first coronavirus wave. The company’s stock rose 26.3 percent to 68,700 VND on June 8 and is on its way to hitting that level again.

ACV shares were flat at 62,200 VND apiece on September 22.

Ground company Sai Gon Cargo Services JSC (SCSC) has seen the volume of goods being transported through Tan Son Nhat International Airport decline in the last six months, but analysts have said this situation would not last long.

They said that travel restrictions had been applied for passengers only, and the cargo transport sector would not suffer too much. Instead of taking people from one location to another, aviation firms have increased their cargo shipments to offset the impacts of the pandemic on their businesses.

This shift in focus had helped SCSC keep its profit margin stable compared to the same period last year, analysts said.

The Hanoi-based firm Noi Bai Cargo Terminal Service JSC (NCTS) is also projected to perform similarly to SCSC.

Recently, Vietnam Airlines and Vietjet re-opened some domestic and international routes and their policies are expected to help boost the performance of ground service companies, including the two firms mentioned above.

SCSC shares (SCS) hit a one-year low of 83,470 VND on March 24 but have since gained 47.7 percent. The company's stock ended at 123,300 VND on September 22.

NCTS shares (NCT) also went in the direction in late March, falling to 40,170 VND, but have soared 45.5 percent in the last six months.

The company’s shares finished at 67,800 VND on September 22.