Yen fluctuations unlikely to have significant impact on Vietnam airport developer ACV

Recent fluctuations of Japanese currency yen are unlikely to exert significantly negative impacts on the performance of state-controlled Airports Corporation of Vietnam (ACV), an SSI Research report says.

It says that the Bank of Japan’s surprise policy rate increase has prompted the Japanese yen (JPY) to rally against the U.S. dollar and Vietnamese dong (VND). “The JPY has appreciated 9.5% versus the VND from the bottom to VND172 per JPY and brought the exchange rate to the same level as in early 2024.”

The report notes that ACV has JPY-denominated loans worth around VND11 trillion ($438 million). For each 1% increase in the JPY/VND rate, it will suffer a loss of VND110 billion in terms of forex deferrals.

SSI Research, a subsidiary of eading brokerage house SSI, estimates that if the JPY/VND rate stays unchanged from the current level until end-2024, ACV will record a forex loss of VND500 billion ($19.9 million), erasing all the year-to-date forex gains.

Therefore, it does not deem such a yen appreciation as being adverse to ACV.

In addition, even if the yen gains 5% in value, the said VND500 billion forex loss is relatively insignificant compared with ACV’s average pre-tax profit of VND14-15 trillion ($557.4-597.2 million) a year.

In the first six months of this year, ACV recorded a gain of VND517 billion ($20.6 million) in forex deferrals thanks to a strong yen depreciation, compared to a loss of VND300 billion in H1/2023.

ACV has a charter capital of VND21,772 billion ($866.8 million), of which the Commission for the Management of State Capital at Enterprises now holds 95.4%, the firm’s Q2 financial statement shows.

The firm earned a consolidated pre-tax profit of VND7,495 billion ($298.4 million) in H1, up 44.3% year-on-year.

SSI Research expects ACV’s profit to rise 38% year-on-year in 2024 and 20% in 2025-2026, assuming that the number of international passengers will grow 15% yearly from 2025 after returning to the pre-pandemic level in 2024.

ACV shares, traded on the UPCoM as ACV, closed up 2% at VND108,900 ($4.34) each on Monday.

SSI Research projects ACV’s target market price at VND136,000 ($5.41) and recommends buying the stock.