VietJet jumps 20% in trading debut as travel demand soars

Bloomberg

VietJet Aviation Joint Stock Co. surged by the 20 percent daily limit in its trading debut on the Ho Chi Minh City Stock Exchange, reflecting investor interest in Vietnam’s first mainboard-listed carrier as travel demand soars in the nation. The stock rose to 108,000 dong at the close of trading, valuing the low-cost carrier at 32.4 trillion dong ($1.4 billion) and exceeding the market values of some rivals such as Asiana Airlines Inc. VietJet, known for marketing stunts listed 300 million shares after an initial public offering at 90,000 dong a share.
“The surge was already anticipated as the initial price was quite cheap and this is an attractive company with a positive growth story,” said Tran Thi Hai Yen, a Ho Chi Minh City-based analyst at ACB Securities JSC.
Rising living standards and more affordable tickets from budget carriers like VietJet as the nation gradually liberalized its aviation market have helped increase demand for air travel. Vietnam will continue to see a double-digit gain in passenger numbers in the next decade, after annual growth of 17 percent in the past decade, according to ACB Securities in December.
The listing by Vietnam’s only privately owned carrier will also boost the size and liquidity of the country’s $97 billion stock market, Southeast Asia’s second-best performer this year. Vietnam Airlines Joint Stock Co. sold shares in 2014 and currently trades on the regulated over-the-counter UpCom market in Hanoi.
Vietnam’s VN Index fell 0.9 percent at the close of trading. The index has gained 6.9 percent this year, outpacing the 6 percent advance in the MSCI South East Asia Index.

Fair Value
Ho Chi Minh City Securities Co. places fair value for VietJet at 100,000 dong per share, it said in a Feb. 7 note. VietJet is the leading low-cost carrier in a country at the beginning of a long-term growth cycle with a compound annual growth rate of passenger volume forecast at 14 percent, according to the note. The airline has efficient cost management and potential to improve per-passenger ancillary revenue, it said.
VietJet’s core customers are working-class Vietnamese with low-to-medium incomes and an increasing demand for air travel, according to ACB Securities.
GIC Pte, Singapore’s sovereign wealth fund, is VietJet’s largest shareholder after billionaire founder and Chief Executive Officer Nguyen Thi Phuong Thao, who has a stake of more than 60 percent held directly and through holding companies and other entities, according to exchange filings.
“I’m very happy that VietJet managed to reach an international pool of investors,” Thao said after the listing event. “The context of Vietnam is extremely favorable to investors and I believe that the IPO of VietJet will have a good impact on the Vietnam stock market.”
VietJet’s 2017 profit is poised to rise 30 percent from 2.3 trillion dong in 2016, the carrier forecast in January. The airline projected its passenger numbers will also climb 30 percent this year, from 15 million in 2016.