INDUSTRY COVERAGE 31-Jan-18
Industry AVIATION New phrase of growth
Rating OVERWEIGHT Pros: . The momentum from recent booming period could keep the annual growth rate of Vietnam aviation at around 12-15% for the next 3 years with motivations from the fast- Contents growing economy, tourism and retail sectors; raising standard of living and middle- income class (IATA). 1. Overviews . Airlines of Vietnam are taking their initial steps to penetrate further regional markets after 2. Vietnam aviation industry recent years of capturing adequately the domestic one. If the expansion is successful, it 3. Performance would maintain airlines recent impressive growth rate for the next 3 years. 4. Valuation . International expansion, in one hand, can bring a substantial number of passengers and 5. Stock pick air cargo through Vietnam aviation chain and, in other hand, it could also enhance noticeably profitability of aviation companies with a higher price in aviation services. . ASEAN SAM or ASEAN Open Skies Agreement is expected to be a game-changing Mr. Bao H. Vo factor for regional aviation in general, Vietnam market in specific in long-term when it could lift the current regulatory barriers of ASEAN markets if it could be ratified. (+84 28) 3914 8585 - Ext: 1460 [email protected] Cons: www.kisvn.vn . Although Vietnam market is still forecasted as the 5th fastest growing-market in the world, the growth of domestic market is slowing down in number of passengers, and it could decline to a single-digit rate beyond 2020 with a relatively high penetration rate. . The competition of airlines (full-service with LCC; short haul with long haul) are expected to intensify in the foreseeable future while the South Asian markets have already been dominated by regional LCCs (AirAsia, Cebu, Indigo, etc.). Hence, airlines of Vietnam would face a strong barrier from regional peers with their expansion plans. . Restrains from airport infrastructure are causing more concerns when it could limit the long-term potential growth of airlines and the whole aviation chain. . The uptrend of fuel price in 2017 is expected to be continue in 2018. This could squeeze and negatively affect the recent improvement of airlines’ profitability. Conclusion . Airlines as the “anchor” of aviation chain will directly benefit from the booming momentum of regional and domestic aviation; hence, their growth rate could be highest in the chain in the next 3 years. However, due to their dramatically high financial leverage, if there is any interruption to the growth of aviation market, they will have to deal with a huge risk of financial instability. . Airport infrastructure and air freight companies have the highest (and improvable) profit margin and cash generation with their unique advantages; hence, those companies can be considered to have much higher financial stability. Nonetheless, their growth rates are more stable but slower than airlines. . Stock pick: VJC, SCS
Page 1 Bloomberg: KISVN
1. Overviews of Aviation industry: 1.1. Industry definition: According to ICB and GICS, Aviation companies are companies providing transportation, logistics and other related services for both passengers and cargo within airport area including: passenger and air freight transportation; air cargo courier and logistics services (package, mail delivery and customs agents); airports operations; ground and other related airport services. In this report, we majorly focus on Vietnam listed aviation companies due to data availability. 1.2. Global and Regional aviation industry 1.2.1 Global:
Global aviation industry 5,000 70 60
4,000 tonnesmn. 50 3,000 40 2,000 30 mn.pax 20 1,000 10 - 0
Cargo Passenger
Source: IATA, KISVN With the explosive expansion of Low-Cost Carriers (LCCs) in recent years, the global aviation industry is slowly returning to profitability and gaining an annual growth rate of 6.3% in term of passenger kilometers (RPK) and 4.2% in term of freight ton kilometers (FTKs) from 2010 to 2016. Especially in 2016, those growth figures were 7.4% and 4% respectively. Furthermore, the International Air Transport Association (IATA) positively implied that the strong performance of global aviation industry could continue in foreseeable future. Based on their cost-efficient operating model and affordable-price services, LCCs has not only noticeably seized the market share of legacy/full-service airlines thorough years or even threated their existence but also reduced significantly the average fare price to make air travel even more accessible. Hence, the air travel demand of markets will raise, and the global growth was forecasted to reach 7.2% in term of passenger number and 7.4% in RPKs. On the other side, the robust growth in air cargo demand from the end of 2016 and early 2017 is consistent with an uptick in global trade, rising export orders and upbeat business confidence indicators. Air cargo often sees a boost in demand at the beginning of an economic upturn as companies look to restock inventories quickly. There are signs that demand growth for air freight may be nearing a peak, but IATA still remain their forecasted growth in FTKs for 2018 of 7.5%. 1.2.2 Regional: Deregulation and Liberalization Asia-Pacific, especially Southeast Asia, has been the fastest growing area with deregulations and liberalizations carrying in major markets recent years, but this is
31-Jan-18 Page 2 Equity Research - KIS VN Bloomberg: KISVN
also the toughest competitive area between carriers with low-cost, full-service and long- and short-haul airlines dueling for market share and depressing yields (Bloomberg Intelligence). The competition in South Asia, may intensify as the penetration of LCC in this area is higher than the North, leads to very diverse performances of airlines in the region.
Aviation growth rates in regions 12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0% 2011 2012 2013 2014 2015 2016 2017 F Asia-Pacific Global North America Europe Latin America Source: IATA (2017), KISVN After a long period of negotiation, the first phrase of ASEAN Single Aviation Market or ASEAN Open Skies agreement, which aims for a “Single Aviation Market” (SAM) between ASEAN countries, has come into effect in 2016; the other two phrases are expected to reach a mutual agreement before 2023. This agreement may not completely create a “single” or fully liberalized market, and is much less ambitious compared to what the EU has achieved; however, this could be seen as a game- changing factor for the growth of aviation industry in the region in long term when it lifts the regulatory limits on the frequency or capacity of flights between international airports across ASEAN countries, thus, boost further regional air transportation for both passengers and cargo. According to Bloomberg Intelligence’s forecasts for Asia-Pacific Aviation in 2018, regional aviation industry will continue to gain passenger-traffic growth for next two decades with high economic growth and a rising middle class (faster than in other regions). The middle class of this region is expected to account for 65% global middle class in 2030 from 46% in 2015 (according to February Brooking Institution study), which will likely to fuel the demand for both domestic and outbound (international) air travel.
However, amid the strong demand and improvement in load factors, high and intensifying competition in Asia, which is strengthen by the increase in seat capacity, will continue to maintain high pressure on passenger yields of airlines in 2018.
31-Jan-18 Page 3 Equity Research - KIS VN Bloomberg: KISVN
Source: Bloomberg Intelligence
Regarding to air cargo, Bloomberg Intelligence and IATA expect that after a rise in cargo traffic of 10.5% in 2017 (through September) following almost no growth in 2015-16, and the air-freight volume growth is on track to rise further in 2018 after its best growth since 2010. Demand growth is outpacing capacity for the first time in three years and the trend is likely to continue next year. Asian Freight Volume and Capacity Growth
Moreover, Asian airlines could enjoy robust cargo load factors and yields in 2018 as cross-border e-commerce is emerging as the air-freight market’s strongest growth motivation for the next several years; especially the growth in Chinese cross-border e-commerce is expected to keep at double-digit rates into 2019 (according to e- Marketer). Chinese Cross Border E-Commerce
31-Jan-18 Page 4 Equity Research - KIS VN Bloomberg: KISVN
Subsidiary/ Associate Ticker Name Operating base Listed of ACV Airports Corporation of Vietnam State-owned (95%) All airports UpCOM HVN Vietnam Airlines State-owned (86%) All airports UpCOM VJC Vietjet Air Private-owned All airports HOSE Jetstar Jetstar Pacific Airline HVN (70%) All airports Non-listed VASCO Vietnam Air Services Company HVN (100%) All airports* Non-listed VATM Vietnam Air Traffic Management Corporation State-owned (100%) All airports Non-listed SKYPEC Vietnam Air Petrol Company Ltd HVN (100%) All airports Non-listed VALC Vietnam Aircraft Leasing Company JSC HVN (32%), BIDV (32%) All airports Non-listed CIA Cam Ranh International Airport Services JSC ASG (22%) Cam Ranh Airport HNX AGS Aviation Ground Services Ltd CIA (51%), VIAGS (n.a) Cam Ranh Airport Non-listed MAS Danang Airport service JSC HVN (36%) Da Nang Airport, Cam Ranh HNX Airport, Phu Bai Airport NCS Noibai Catering Services JSC HVN (60%), SAS (10%) Noi Bai Airport UpCOM NCT Noi Bai Cargo Terminal Services JSC HVN (55%), NAS (7%) Noi Bai Airport HOSE ASG Airport Services JSC Interserco Noi Bai Airport HNX ALS Aviation Logistics Corporation HVN (11%), NCT (11%), Noi Bai Airport Non-listed Interserco () ACSV Air Cargo Services of Vietnam JSC ACV (20%) Noi Bai Airport Non-listed HGS Hanoi Ground Services JSC ACV (20%) Noi Bai Airport Non-listed NAS Noibai Airport Services JSC HVN (51%) Noi Bai Airport UpCOM NAFSC Noibai Aviation Fuel Service JSC ACV (60%) Noi Bai Airport Non-listed SCS Saigon Cargo Service Corporation GMD (35%), ACV (15%) Tan Son Nhat Airport UpCOM SAS Southern Airports Services JSC ACV (49%) Tan Son Nhat Airport UpCOM SGN Saigon Ground Services JSC ACV (48%) Tan Son Nhat Airport UpCOM VACS Vietnam Airlines Caterers Ltd. HVN (100%) Tan Son Nhat Airport Non-listed TCSC Tan Son Nhat Cargo Services Company Ltd HVN (55%), SAS (N.A) Tan Son Nhat Airport Non-listed TAPETCO Tan Son Nhat Petrol Commercial JSC ACV (25%), SAS (37%), Tan Son Nhat Airport Non-listed SKYPEC SATCO Southern Airports Trading JSC ACV (30%) Tan Son Nhat Airport Non-listed SATSCO Southern Airport Transportation JSC ACV (30%) Tan Son Nhat Airport Non-listed SAPL Southern Air Petrol Logistics JSC HVN (n.a) Tan Son Nhat Airport Non-listed AST Taseco Air Services JSC Taseco Thang Long Tan Son Nhat Airport, Noi UpCOM (60%) Bai Airport, Da Nang Airport, Cam Ranh Airport, Phu Bai Airport, Phu Quoc Airport VINACS Vietnam Air Catering Services JSC Taseco Thang Long, AST Tan Son Nhat Airport, Noi Non-listed (40%) Bai Airport, Da Nang Airport, Cam Ranh Airport, Phu Quoc Airport VIAGS Vietnam Airport Ground Services Ltd. HVN Tan Son Nhat Airport, Noi Non-listed Bai Airport, Da Nang Airport, Phu Quoc Airport
31-Jan-18 Page 5 Equity Research - KIS VN Bloomberg: KISVN
The value chain of Vietnam Aviation industry consists of a number of interlinked segments and can be generally divided into the following chains: For Passengers:
•Passenger Transportation (to the airports): SAS, NAS, AST, CIA, MAS •Parking lot/ Airport infrastructure: ACV •Retail stores and restaurants: SAS, AST, NAS Pre- •Check-in, baggage scaning and passenger services: ACV, VIAGS, SCS, NCT, ACSV, HGS, MAS, Security CIA
•Airport customs •Duty-free commerce: SAS, NAS, CIA •VIP lounges: SAS, NAS, CIA Post Security •Retail stores and restaurants: SAS, AST, NAS, CIA
•Passengers transportation (from terminals to airlines): ACV, SGN, VIAGS, NAS •Caterers: NCS, VACS (subsidiary of NCS), MAS, VINACS (AST), CIA •Airlines: VJC, HVN (inc. Jestar Pacific, VASCO) •For airlines: •Apron: ACV, SCS •Ramping, Cleaning aircrafts: SGN, VIAGS, CIA, MAS, HGS Flight Area •Handling (load/unload) cargo: SGN, VIAGS, CIA, MAS, HGS •Landing/Take-off Services: ACV, VATM •Fuel: SKYPEC, NAFSC, TAPETCO, SAPL •Aircraft leasing: VALC
31-Jan-18 Page 6 Equity Research - KIS VN Bloomberg: KISVN
For air cargo:
•Cargo Transportation (to air cargo terminals) •Parking lot: ACV, SCS, NCT, ACSV, ALS •Air Cargo Terminals: SCS, ACSV, NCT, ALS •Unload/handling, sorting, storing, security scanning and custom clearance Pre- •Processing (building ULDs or packing in trolleys) Security •Non Cargo-Terminals: MAS, CIA, VIAGS, HGS •Unload/handling, sorting, storing and security scanning
•Transport cargo to airlines: SGN, VIAGS •Load cargo to airlines: SGN, VIAGS Post Security
•Airlines: •Passenger airlines: HVN (inc. Jetstar, VASCO), VJC, Vietstar, Foreign airlines •Cargo Airlines: Foreign airlines (Lufthansa Cargo, Cargolux Airlines,etc.) •Services for airlines: •Apron: ACV, SCS •Ramping, Cleaning aircrafts: SGN, VIAGS, CIA, MAS, HGS Flight •Handling (load/unload) cargo: SGN, VIAGS, CIA, MAS, HGS Area •Landing/Take-off Services: ACV, VATM •Fuel: SKYPEC, NAFSC, TAPETCO, SAPL •Aircraft leasing: VALC
As can be seen from the value chain above, Vietnam aviation industry has a complex interlink operations and ownership. On the other hand, based on each company’s major business, we can also group them in following segments for later comparisons: Aviation infrastructure providers (airports, air navigation service providers, aviation communication providers): ACV, VATM Airports services providers: o Caterers: NCS, VACS, MAS, VINACS o Duty-free, airport commerce and services: SAS, NCT, MAS, AST, CIA Air Freight & Logistics services providers: o Air Cargo Terminals: SCS, TCSC, ACSV, NCT, ALS, CIA o Cargo handling/Logistics: SGN, VIAGS, HGS, CIA, MAS Airlines: HVN, VJC, Jetstar, VASCO, Vietstar
31-Jan-18 Page 7 Equity Research - KIS VN Bloomberg: KISVN
Airlines •HVN, VJC •Jetstar, VASCO, Vietstar
Air Freight & Logistics Transport •SCS, NCT, SGN Infrastructure •TCSC, ACSV, ALS, VIAGS, HGS •ACV
Airport Services •SAS, MAS, NCS, CIA, NAS •VACS, AST, VINACS
2.2. Catalysts 2.2.1 Slowing down but still fast growing domestic market In term of passengers: From 2011 to 2016, the total number of passengers of Vietnam aviation industry increased significantly from 23.7 million to 52 million (approximately 17% of CAGR). The annual average growth rates of domestic and international ones were 19% and 16% respectively. Nonetheless, the growth rate slightly declined to 16% in 2017 (according to data from CAAV).
mn. pax Vietnam aviation passengers 60 50 40 24 30 18 16 15 20 12 13 28 10 23 12 12 15 18 - 2011 2012 2013 2014 2015 2016 Domestic International
Source: CAPA, KISVN
In term of air cargo, according to data of GSO, the air cargo volume increased from 45 thousand tons in 2000 to 200 thousand tons in 2011 (CARG: +18%). Then after a fluctuation in 2012 and 2013 following the regional trend, it raised to 318 thousand tons at the end of 2017 (+16%yoy; CARG: 11.5%).
31-Jan-18 Page 8 Equity Research - KIS VN Bloomberg: KISVN
Total Vietnam aviation passenger 160 28% 150.0 30%
140 22% 25% 120 101.5 93.4 97.4 20% 100 17% 16% 89.4 15% 79.1 80 12% 13% 15% 60.3 69.4 14% 60 52.0 10% 7% 40.5 40 29.5 33.1 23.7 25.3 5% 4% 4% 3% 5% 20
0 0% 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2035F
Source: CAPA, KISVN
Vietnam Air Freight 350 36% 318 40% 300 274 30% 230 250 % Growth 200 202 190 191 184 200 13% 20% 130 131 140 19% 150 111 121 10% 14% 16% 100 10%
Thousand Tons Thousand 9% 7% 6% 5% 0% 50 1% -5% -4% - -10% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E Air Cargo Growth Source: GSO, KISVN Recent years were considered as a booming period of Vietnam aviation industry with Foreign Tourists to a double-digit growth rate in both passenger number and cargo volume; moreover, Vietnam 2017 the momentum from this could keep the average growth rate at around 12-15% annually for the next 3 years as the domestic market gains the motivation from the fast-growing economy, raising standard of living and middle-income class (IATA). 2% 14% Additionally, as 85% foreign tourist came to Vietnam through airlines in 2017, the positive expectations for Vietnam tourism will also supports the growth of aviation sector in the future. Besides, according to Vietnam Ministry of Industry and Trade, Vietnam e-commerce retail sales is in a fast-growing pace (around 35% annually), among the fastest growing markets in the world; the growth rate was 25% in 2017 and is expected to be 84% 20% to 2020. This structural change in retailing is really starting to benefit not only the land logistics but also the air cargo business till 2020.
By Air By sea By land
Source: GSO, KISVN
31-Jan-18 Page 9 Equity Research - KIS VN Bloomberg: KISVN
Foreign Visitors to Vietnam
16 35% 40% 26% 29% 12 19% 14% 11% 20% 5% 8 0% 10.9 0% 4 8.3 million visitorsmillion 6.0 6.2 6.3 4.1 5.0 5.6 0 -20% 2010 2011 2012 2013 2014 2015 2016 2017E
By Air By sea By land Growth
Source: GSO, KISVN
Although Vietnam aviation market is expected to be 5th fastest growing market globally till 2035 (IATA), the growth of four to five times the GDP growth rate might not be sustained. Furthermore, according to CAPA, Vietnam domestic market’s penetration rate in 2015 and 2016 was estimated at 50-55%, relatively high. Therefore, it could be reasonable as the domestic market would be slowdown to grow to a single digit rate beyond 2020, and the domestic competition could intensify in the long term.
Vietnam Aviation international market share
100% Source: CAPA – Centre for Aviation 90% 2.2.2 International network’s expansions 33% 80% 40% 41% 40% From 2012 to 2016, despite that local airlines of Vietnam (HVN and VJC majorly) have 70% showed a rapid expansion, especially the Low-cost carrier VJC, they mainly focus on 60% 11% 1% 3% 6% capturing their domestic share as well as adequately serving the sharp growth of the 50% 2% 1% 5% domestic markets; the majority of international markets are dominated by foreign 40% airlines. In the early of 2017, Vietnam airlines (HVN and VJC) are taking their initial 30% 59% steps to obtain international market shares in order to maintain their impressive growth 54% 53% 51% 20% in the past. For example, VJC established 19 new routes in 2017, in which 13 of them 10% are international routes to regional destinations (Mainland China, Korea, Thailand, 0% Indonesia, etc.); VJC also disclosed that it is aiming to expand further its market to 2013 2014 2015 2016 North Asian markets when still maintain its major domestic market share. Besides, Foreign airlines Jetstar HVN also has its own movements by maintaining its high-end brand of Vietnam Vietjet Vietnam Airlines Airlines and aiming to establish new international routes whereas its subsidiaries
Source: CAAV, CAPA, KISVN
31-Jan-18 Page 10 Equity Research - KIS VN Bloomberg: KISVN
(Jetstar and VASCO) are renewing their fleets and services to compete with VJC in LCC market (majorly in domestic routes). For long term, ASEAN Single Aviation Market Agreement (Open Skies Agreement) has started coming into effect, which is expected to boost dramatically the regional air transportation. With the central location, Vietnam aviation is expected to gain a huge advantage from this. Moreover, as airlines expand their market to international routes and potentially strengthen the flows of international passengers and air cargo through Vietnam, the price of aviation services for international market generally will increase noticeably than in domestic ones, which is also an opportunity for not only airlines but also other aviation companies of Vietnam to enhance their profit margin significantly. 2.2.3 Infrastructure restrains Aviation industry in general and airlines in specific are affected strongly by the infrastructure of airports. In Vietnam, according to CAAV, although a major of Vietnam’s airports are operating under their designed capacities, the overcapacity issue in major international terminals has been raising concerns to the future development. At the end of 2017, Noi Bai, Tan Son Nhat International airports are still the major hubs of Vietnam aviation for both domestic and international flights among 22 current Vietnam airports. In which, Tan Son Nhat airport, which has a designed capacity of 25 million passengers/year, has served 36.2 million passengers in 2017 (increased +11.6%yoy and accounted for 39% of total passengers went through Vietnam airports) (according to CAAV) - nearly 145% of its design capacity. Besides TSN, the utilization rate of Noi Bai, Danang and Cam Ranh airports in 2016 were at around 105%, 146% and 300% of their capacity.
Utilization to Designed Utilization rate Unit: mn. passengers Designed Capacity 2016 capacity (%)
Tan Son Nhat International Airport 25.0 32.0 128% Noi Bai International Airport 19.0 20.0 105% Danang International Airport 6.0 8.8 146% Cam Ranh International Airport 1.5 4.9 324% Cat Bi International Airport 5.0 1.3 26% Can Tho International Airport 5.0 N.A. N.A. Vinh International Airport 3.0 N.A. N.A. Phu Bai International Airport 1.5 1.2 77% Phu Quoc International Airport 2.7 N.A. N.A. Chu Lai Airport 0.5 N.A. N.A. Tuy Hoa Airport 0.55 0.64 116% Tho Xuan Airport 0.6 N.A. N.A. Phu Cat Airport 0.6 N.A. N.A. Source: CAAV, ACV, KISVN
As the major hubs are overcapacity, the congestion issue is causing more concerns for the potential development of Vietnam aviation when it not only reduces airlines operating performances but also limit their future growth, especially when both Vietnam airlines and Vietjet Air are aiming for the next stage of expansion
31-Jan-18 Page 11 Equity Research - KIS VN Bloomberg: KISVN
(domestically and internationally) in the next few years. Vietnam government is also considering suitable solutions for this issue such as adding or expanding aprons, terminals of airports, or even building new airport (Long Thanh International Airport); however, with the current limitation of government spending budget, we only expect the upgrading and expansion in major terminals to minimize its impacts in the next 3 years. 2.2.4 Fluctuation of fuel price Fuel expense is one of the critical factors that affect directly to the performance of airlines, when it is their highest operating cost and can affect noticeably their profitability and competitiveness. Similar to regional airlines, the combination between low fuel price and booming of air travelers from Mid-2014 has benefited significantly the performance of airlines. It has been a unique opportunity for both HVN (with its subsidiaries) and VJC to not only recover and remain their profitability even during the recent fare pressure but also expand rapidly domestic market. As January 18th 2018, the price of Brent oil already surpassed USD 70 per barrel (+22% from Jan 2017), leads the price of Jet fuel to the 3-year highest level. According to a recent research of Corrine Png (“Rising oil price impact analysis on all 33 listed airline equities in the Asia Pacific – Nov 2017 Update” - Crucial Perspective), only one-third of Asia Pacific airlines are well hedged on fuel; airlines of Vietnam, on the other sides, are among the airlines that are highly sensitive to oil price. Her estimate implied that every 1% rise in jet fuel in the future could probably decrease their net annual profit by 6% due to their limited fuel hedging plan. Therefore, the recovery of fuel/oil price, especially from the beginning of 2017 has raised a concern for airlines. Nonetheless, both HVN and VJC are upgrading their fleets with new-model aircrafts (such as: A320, A321neo, B787, etc.), which have better fuel efficiency and are expected to reduce fuel consumption by 10-15%. This can be considered to be one of their counter plans to the rising in fuel price.
Source: Bloomberg
3. Performance of aviation value chain: For each aviation segment (divided above), we compare the performance of each segment in terms of growth rate, profitability, financial leverage and cash flows
31-Jan-18 Page 12 Equity Research - KIS VN Bloomberg: KISVN
situation. The performance of segments is calculated from the data of all listed companies as follow:
Company Aviation Segment HVN Airlines VJC Airlines NCT Airport Freight & Logistics SCS Airport Freight & Logistics SGN Airport Freight & Logistics AST Airport Services CIA Airport Services MAS Airport Services NAS Airport Services NCS Airport Services SAS Airport Services ACV Transport Infrastructure 3.1. Growth The growth of aviation industry regarding to net sales and profit is directly affected by the number of passengers and air cargo volume going through the anchor node – airlines. Hence, airlines can be considered as the direct benefiters (in terms of net revenue) from the growth, and the growth rate of net revenue of companies in Vietnam aviation seems to be correlated with the growth of airlines: the more passengers (or cargo) go through airlines node, the more passengers (or cargo) uses services of other companies (airport ground services, freight services, etc.). On the other hand, companies providing airport and air freight services are generally limited within their facility’s capacities, and it could take several years for them to expand their facility. In contrast, airlines, in some cases, can temporarily gain extra capacity though charter flights, wet leases, etc. to capture adequately the growth in demand.
Net Revenue Growth 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% 2012 2013 2014 2015 2016 T12M 2017
Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
31-Jan-18 Page 13 Equity Research - KIS VN Bloomberg: KISVN
Net Income Growth 250% 700% 200% 600% 150% 500% 100% 400%
50% 300% Airlines 0% 200%
Others segmentsOthers -50% 100% -100% 0% 2012 2013 2014 2015 2016 T12M 2017 Axis Title
Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
Source: Companies’ reports, KISVN
3.2. Profitability As can be seen from graphs below, airlines of Vietnam have the lowest and least sustainable profitability in the chain (regarding to net profit margin and ROCE). This is quite similar to the situation of global airlines: the profitability of airlines has recovered from 2014 with the benefits from the downtrend of fuel price and the booming of regional LCCs but has still remained low as compare to others in aviation chain. By contrast, Vietnam’s airport infrastructure and air freight companies tends to have the higher profitability (in average) than other segments because the high entry barrier of those markets. In which, both segments have the highest net margin, but the average ROCE ratio of air freight segment is noticeably higher than the rest. Meanwhile, the monopoly of ACV in Vietnam aviation infrastructure, which is resulted from its heavy capital nature, is exchanged for heavily regulated airport fees by Ministry of Transportation, which finally limits the profit of the company. Moreover, as stated above, because not all 22 airports are operating efficiently, the ROCE of ACV is not impressive.
Net Margin 50%
40%
30%
20%
10%
0%
-10% 2011 2012 2013 2014 2015 2016 T12M 2017
Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
31-Jan-18 Page 14 Equity Research - KIS VN Bloomberg: KISVN
ROCE 70% 60% 50% 40% 30% 20% 10% 0% -10% 2011 2012 2013 2014 2015 2016 T12M 2017
Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
Source: Companies’ reports, KISVN
3.3. Financial Risk/Leverage In terms of financial risk (proxied by net-debt-to-equity and net-debt-to-EBITDA ratios), according to our observations, airline segment has a dramatically high financial leverage ratio compare to other segments. This could be due to airlines’ extreme requirement for investment capitals, primarily in new or replacement aircrafts, airframes, engines and other aircraft or ground components, when airlines of Vietnam have been aggressively expanding their fleets to adequately expand and capture the domestic market recently. Although the airport infrastructure segment also requires a substantial amount of investment capital, it also has fared somewhat better than airlines in terms of financial returns and cash flows generations. Regarding to ACV, due to its sustainable cash generating ability in recent years, its total value of cash, cash equivalent and short- term investments (mostly deposits in banks) were relatively high compare to its total debts and has been outweighed its total debt from 2014, which implies a better finance than airlines.
Net Debt / Equity (%) 100% 700%
50% 600% 500% 0% 400% -50%
300% Airlines -100%
200% Other segmentsOther -150% 100% -200% 0% 2011 2012 2013 2014 2015 2016 T12M 2017
Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
31-Jan-18 Page 15 Equity Research - KIS VN Bloomberg: KISVN
Net Debt / EBITDA 12.00
8.00
4.00
0.00
-4.00
-8.00 2011 2012 2013 2014 2015 2016 T12M 2017
Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
Source: Companies’ reports, KISVN
3.4. Cash flows Lastly, we consider the differences in cash flows situations of aviation segments. With the recent impressive growth and improvement in profitability, their cash flow situation has been improved significantly. Among that, we can see the most significant changes belong to airlines when their operating cash flows and net cash flows are improved significantly in the past 3 years. Similarly, airport infrastructure segment also has a high operating cash flows and also being improved recently. However, in terms of net cash flows, again due to the required high investment capital of both segments, the net cash flows were not stable through years. The other segments (airport services and freight & logistics) has much smaller but more stable cash flows.
Net Cash flows from operating 8,000 25,000 7,000 20,000 6,000
5,000 15,000
4,000 Airlines (VNDbn.) Airlines 3,000 10,000 2,000
Other segments (VND bn.) (VND segmentsOther 5,000 1,000 - - 2011 2012 2013 2014 2015 2016 T12M 2017 Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
31-Jan-18 Page 16 Equity Research - KIS VN Bloomberg: KISVN
Net Cash Flows
4,000 2,500
3,000 2,000
2,000 1,500
1,000 1,000
0 500
-1,000 - Airlines(VND bn.) Airlines(VND
Other segments (VNDbn.) segmentsOther -2,000 (500)
-3,000 (1,000) 2011 2012 2013 2014 2015 2016 T12M 2017 Transport Infrastructure Airport Services Airport Freight & Logistics Airlines
Source: Companies’ reports, KISVN
3.5. Estimations: From the comparisons and the catalysts of aviation industry above, we have some estimations for the next 3 years: Regarding to airlines, as the direct benefiters from the growth in number of passengers and cargo volume, will continue to have a two-digit growth rate in revenue from the momentum of the fast-growing period of Vietnam aviation market. However, as the domestic market is gradually matured (as presented by the slowdown in growth rate of 2017), they have to consider to reach further to international/regional markets; they also have to face the higher (fiercening) competition not only from their local competitors but also from regional ones (AirAsia, Cebu, Indigo, etc.). Moreover, the uptrend of fuel price could squeeze their profitability. Hence, in our positive scenario, the net margin of airlines is expected to only remain flat in the next 3 years. With a high leverage ratio, airlines prove to have a much higher risk from financial stability which in one side can boost their growth during booming years but in other side can also create a huge pressure on their business result if there is any interruption to the uptrend of the market. Secondly, the “non-airline” companies would also gain advantage from the fast- growing market, but the growth rate could be relatively stable, not as impressive as airlines. In contrast, they could enjoy a much sustainable finance aspect. Among them, air freight and airport infrastructure companies would have higher profitability because of their duo/monopoly alike markets. Furthermore, their profitability could be enhanced further in the next 3-5 years by either raising their fees (e.g. ACV was approved by the Ministry of Transportation to increase their fees, which can probably increase their profit by around VND 1,000bn. from 2018) or/and improving operating efficiency.
31-Jan-18 Page 17 Equity Research - KIS VN Bloomberg: KISVN
Price 6M Trading Stocks Name Segments Exchange Market Cap P/E P/B (30/01/2018) Volume AIRPORTS CORP OF Transport ACV UpCOM 105,000 228,603 47.6 9.4 75,000 VIETNAM JSC Infrastructure TASECO AIR SERVICES AST Airport Services Ho Chi Minh 64,500 2,322 11.0 5.1 95,900 JSC CAM RANH CIA Airport Services Hanoi 60,000 480 7.6 3.7 14,900 INTERNATIONAL AIRPO HVN VIETNAM AIRLINES JSC Airlines UpCOM 58,600 71,933 34.8 4.6 1,369,300 DANANG AIRPORT MAS Airport Services Hanoi 87,500 373 6.8 5.8 5,438 SERVICES JSC NOI BAI AIRPORT NAS Airport Services UpCOM 32,000 266 9.7 1.7 5,200 SERVICES JSC NOIBAI CATERING NCS Airport Services UpCOM 50,000 897 12.5 5.1 4,500 SERVICES JSC NOIBAI CARGO TERMINAL Airport Freight & NCT Ho Chi Minh 97,000 2,538 9.6 6.8 12,110 SER JSC Logistics SOUTHERN AIRPORTS SAS Airport Services UpCOM 30,500 4,071 19.3 2.8 7,400 SERVICES JSC SAIGON CARGO SERVICE Airport Freight & SCS UpCOM 153,000 8,748 29.7 10.1 4,800 CORP Logistics Airport Freight & SGN SAI GON GROUND JSC UpCOM 152,500 3,655 21.0 10.4 1,600 Logistics VJC VIETJET AVIATION JSC Airlines Ho Chi Minh 187,700 84,717 30.1 17.4 906,790 Source: Bloomberg, KISVN
31-Jan-18 Page 18 Equity Research - KIS VN Bloomberg: KISVN
Stock Pick SCS Saigon Cargo Service Corp. (SCS – UpCOM) Rating HOLD Market price (VND) 150,500 Pros Target price (VND) 162,300 . Air Cargo of Vietnam is expected to grow at 12-15% annually till 2020 from the growth Annualized price return (%) 8% of the economy, export/import activities, middle-income class, retail and tourism. Expected dividend yield (%) 3% . SCS is the only one air cargo terminal (out of two) in Tan Son Nhat International airport that still be able to expand the capacity of the terminal, storage and apron area. Expected return (%) 10% . The possibility of a new competitor in TSN airport is almost zero, and its current competitor (TCSC) is running at its maximum capacity (cannot enhance further). VND Price - Volume Hence, SCS has a strong bargaining power to customers. '000 200 2,500 . SCS is also the only air cargo terminal in TSN airport has a chain of logistics services for cold cargo. Hence, almost all the fresh/cold air cargo is processed and transferred 150 2,000 through SCS (18% SCS’s total cargo volume in 2016). 1,500 100 . High profitability and strong financial circumstance. 1,000 . 11M.2017: Cargo volume of SCS reached 169k tones (+17%yoy); 50 500 . Net sales and PAT 2017 were estimated at VND588bn.(+19%yoy) and VND345bn. 0 0 08/2017 11/2017 '000 (+41%yoy) respectively. shares . Considering to move from UpCOM to HOSE. Stock performance (%) Cons: YTD 1T 3T 12T . SCS’s new projects depend strongly on the master plan of TSN Airport of Vietnam Absolute 27% 28% 46% N.A. Government. Relative 15% 17% 13% N.A. Source: Bloomberg, relate to VNI . Currently listed on UpCOM, low liquidity and current high valuation. . Risks of FX rate’s fluctuation and aviation safety could affect SCS’s business result. Stock Statistics 31-Jan-18 52-week range (VND) 71.1-162 Recommendation: Shares o/s (m) 57 With unique and lasting competitiveness, SCS is expected to have a steady growth rate, Mkt cap (VND bn.) 8,634 high profitability and sustainable finance in the next 3 years. Applying P/E and DCF Mkt cap ($m) 380 methods, we evaluate the value of SCS’s shares at VND 162.3k at the end of 2018; the total expected return is 10% (including 3% dividend yield) at the current market price of Foreign % owned 0 VND 150.5k. Therefore, we recommend HOLD with SCS’s shares. Est. free float (mn. shares) 57 3m avg. (shares) 188,673 VND bn. 2015 2016 2017E 2018F 2019F Index: VN-Index/HNX 1,110 Net revenue 341 496 579 690 825 Source: Bloomberg Growth (%) 24% 45% 17% 19% 20% Operating profit 187 289 370 460 570 Ownership 31-Jan-18 Margin (%) 55% 58% 64% 67% 69% Gemadept Corporation 37.3% Net profit 135 245 322 410 512 Airports Corporation of 15.2% Margin (%) 40% 49% 56% 59% 62% Vietnam Outstanding shares (million) 41 46 49 49 49 EPS (bonus-adjusted, VND) 2,735 4,959 6,517 8,290 10,356 Saigon Aviation Investment 4.6% Growth (%) 46% 81% 31% 27% 25% Service Trading JSC ROE (%) (excl. minority) 24% 36% 40% 45% 47% Source: Bloomberg Net debt/Equity (%) 36% 2% -11% -26% -43% PER (x) 42.5 23.4 17.8 14 11.2 PBR (x) 7.8 7 6.8 5.9 4.7 EV/EBITDA (x) 24.7 16.8 13.3 10.6 8.3 DPS (VND, as reported) 1,000 3,000 5,000 5,000 5,000 Dividend yield (%) 0.70% 2.40% 4.30% 4.30% 4.30% *exclude 7.2 mn. preferred shares of Air Force Unit A41
31-Jan-18 Page 19 Equity Research - KIS VN Bloomberg: KISVN
FINANCIALS MODEL SCS Market Cap: VND7523bn. CASH FLOWS AND BS ITEMS 2015 2016 2017E 2018E Unit: VND bn. 2016 2017E 2018F 2019F (VND bn.) Net Revenue 496 579 690 825 Increase in WC 27 1 11 13 Sales growth (%) 45% 17% 19% 20% Capex 1 12 6 10 Air Cargo 455 542 655 790 Other cash flow items -27 -53 -25 0 Apron 7 7 7 7 Free cash flow 187 340 409 467 Leasing 33 38 38 38 Share issues 0 5 5 0 Others 0 1 1 1 Dividends paid 51 143 234 230 COGS 137 135 153 173 Increase in net debt -136 -201 -180 -237 Gross margin (%) 72% 77% 78% 79% Net debt, end of year 220 19 -161 -398 SG&A 70 65 69 72 Enterprise value 7,743 7,542 7,362 7,125 EBITDA 343 443 536 648 Total equity 609 769 886 1,089 EBITDA margin (%) 69% 75% 76% 78% Minority interests 0 0 0 0 Depr’n & Amort’n 54 56 57 57 Shareholder’s equity 609 769 886 1,089 Operating profit 289 387 480 591 BVPS (VND) 14,929 16,655 17,719 21,780 Operating margin (%) 58% 66% 68% 71% Net debt / equity (%) 36% 2% -18% -37% Net interest expense 11 1 -5 -13 Net debt / EBITDA (x) 0.9 0.1 -0.4 -0.7 As % of avg. net debt 9% -1% 2% 2% Total assets 922 967 973 1,166 Interest cover (x) 27 635 (97) (44) Net debt = debts – cash & equivalent
Other profit/loss -3 -3 -3 -3 KEY RETURN AND VALUATION 2015 2016 2017E 2018F Tax 30 39 49 61 RATIOS Effective tax rate (%) 11% 10% 10% 10% ROE (%)(excl. minority interest) 24% 36% 42% 44% Net profit 245 345 433 541 ROA (%) 15% 25% 35% 37% Net margin (%) 49% 59% 62% 65% ROIC (%) 18% 31% 46% 61% Minorities 0 0 0 0 WACC (%) 13% 15% 15% 15% Net attributable profit 245 345 433 541 PER (x) 59 32 23 18 Number of shares (mn.) 46 50 50 50 PBR (x) 10 9 8 7 4,66 PSR (x) 22 15 13 11 EPS (VND, bonus-adjusted) 6,560 8,315 10,474 0 EV/EBITDA (x) 32 22 17 13 EPS growth (%) 81% 41% 27% 26% EV/Sales (x) 41 22 18 15 3,00 DPS (VND) 4,000 4,000 4,000 Dividend yield (%) 0 0.5% 1.8% 2.7% 2.7% (bonus-adjusted) Payout ratio (%) 64% 61% 48% 38%
EBITDA = Net revenue – (COGs -Depr’n&Amort’n)– SG&A expenses EBIT = EBITDA – Depr’n&Amort’n Net interest expenses = interest expenses – interest income Payout ratio = Dividend paid / Net attributable profit.
31-Jan-18 Page 20 Equity Research - KIS VN Bloomberg: KISVN
Stock Pick VJC Vietjet Air JSC. (VJC - HOSE)
Rating OVERWEIGHT Pros: Market price (VND) 192,000 . Growth rate of domestic market is expected to be one of the fastest in the world till Target price (VND) 227,900 2035 with the major support from tourism and increase mid-income population. Annualized price return (%) 19% . Rapid capacity expansion to seize international market share; VJC will focus on short- Expected dividend yield (%) 2% haul routes, interlines, codeshares and charters to reach North Asia markets. Expected return (%) 20% . Fare price will be remained low but yield from airline services could be enhanced by the increase of ancillary revenue following the expansion in international market. . Sales and Leaseback operation will be used with VJC’s fleet expansion, hence, brings VND Price - Volume '000 a substantial income and reduce fund shortage issue in short term. 250 5,000 Cons: 200 4,000 150 3,000 . Domestic market growth is slowing down. International expansion can be considered to be compulsory to replicate its rapid growth rate in the past. 100 2,000 . Regional competition is increasing fiercely correlated with regional liberalization 50 1,000 (ASEAN SAM). With a weak brand and distribution network outside Vietnam, VJC will 0 0 face a strong barrier from other regional peers like AirAsia, Cebu and Lion Air. 01/2017 04/2017 07/2017 '000 shares . If VJC cannot penetrate further to international markets, VJC will have to deal with over-ordering issue when domestic market might not be able to support their future Stock performance (%) fleet size to maintain their recent impressive growth rate. YTD 1T 3T 12T . Fuel expense accounts for 36% operating costs of VJC (2016) and could reduce Absolute 33% 32% 75% N.A. significantly its performance due to the recent uptrend of fuel price Relative 21% 22% 42% N.A. . Infrastructure constrains (airport congestion) could limit the long-term expansion. Source: Bloomberg, relate to VNI . International expansion also leads to higher exposure to FX risk. Stock Statistics 31-Jan-18 Recommendations: 52-week range (VND) 58.7-199.5 Shares o/s (m) 451 For 2018 estimations, the momentum from blooming of air travel demand will support for Mkt cap (VND bn.) 87,696 another impressive growth rate of VJC. Thus, we forecast VJC’s Net revenue and NPAT at the end of 2018 at VND45,875bn (+22%yoy) and VND5,974bn (+38%yoy) relatively. We Mkt cap ($mn.) 3,862 evaluate VJC’s stocks at VND 227.9k per stock at the end of 2018. The total expected Foreign % owned 0 return is 20% (including 2% dividend yield) with the current market price of VND192k. Est. free float (mn. shares) 275 We recommend OVERWEIGHT for VJC’s stock. 3m avg. daily vol. (shares) 1,185,465 Index: VN-Index/HNX 1,110 VND bn. 2015 2016 2017E 2018F 2019F
Net revenue 19,845 27,499 40,627 50,086 60,604 Ownership 31-Jan-18 Growth (%) 128% 39% 48% 23% 21% SUNFLOWER SUNNY 29% Operating profit 1,589 3,195 5,288 7,361 9,129 NGUYEN THI PHUONG THAO 8.7% Margin (%) 33% 37% 37% 37% 37% GIC/Government of Singapore 5.1% Net profit 1,171 2,496 4,578 5,984 8,019 Source: Bloomberg Margin (%) 6% 9% 11% 12% 13% Outstanding shares (million) 145 300 451 451 451 EPS (bonus-adjusted, VND) 7,667 7,903 9,634 12,595 16,879 Growth (%) 79% 3% 22% 31% 34% ROE (%) (excl. minority) 75% 73% 63% 49% 45% Net debt/Equity (%) 109% 86% 38% 39% 22% PER (x) 77.95 36.55 19.93 15.24 11.38 PBR (x) 12.97 12.17 8.80 5.98 4.10 EV/EBITDAR (x) 24.57 15.36 10.75 7.53 6.11 DPS (VND, as reported) 0 1,000 3,000 3,000 3,000 Dividend yield (%) 0.00% 0.35% 1.56% 1.56% 1.56%
31-Jan-18 Page 21 Equity Research - KIS VN Bloomberg: KISVN
FINANCIALS MODEL VJC Mkt cap: VND 86,658bn. CASH FLOWS AND 2015 2016 2017E 2018F Unit: VND bn. 2015 2016 2017E 2018F BS ITEMS (VND bn.) Net Revenue 19,845 27,499 40,627 50,086 Increase in WC 689 1,882 1,009 1,558 Sales growth (%) 128% 39% 48% 23% Capex 1,210 3,146 4,676 6,353 Airline services 11,079 15,917 22,728 33,240 Other cash flow items 347 -395 7 (66) Sale & Leaseback 8,766 11,582 17,899 16,846 Free cash flow -544 -1,476 -197 -561 COGS 17,736 23,597 34,330 41,249 Share issues 0 72 1,894 0 Gross margin (%) 10.6% 14.2% 16% 18% Dividends paid 0 300 1,354 1,354 SG&A 521 707 1,009 1,476 Increase in net debt 544 1,705 -343 1,915 EBITDAR 4,141 7,431 10,764 14,470 Net debt, end of year 2,350 4,054 3,711 5,627 EBITDAR margin (%) 20.9% 27.0% 26.5% 28.9% Enterprise value 53,579 55,283 54,941 56,856 Dep’t & Amor’s 531 661 829 1,171 Total equity 2,147 4,734 9,852 14,482 Rental cost 2,021 3,575 4,558 5,809 Minority interests 1 1 2 2 Operating profit 1,589 3,195 5,288 7,361 Shareholder’s equity 2,146 4,733 9,850 14,480 Operating margin (%) 8.0% 11.6% 13.0% 14.7% BVPS (VND) 14,802 15,775 21,823 32,081 Net interest expense 115 125 159 145 Net debt / equity (%) 109% 86% 38% 39% As % of avg. net debt 5.5% 3.9% 3.9% 3.9% Net debt / EBITDA (x) 1.1 1.1 0.6 0.6 Interest cover (x) 13.8 25.5 33.3 50.7 Total assets 12,045 20,063 26,147 33,636 Other profit/loss -306 -367 -281 -316 Net debt = debts – cash & equivalent Tax -2 207 271 916 KEY RETURN AND 2015 2016 2017E 2018F Effective tax rate (%) 0% 8% 6% 13% VALUATION RATIOS ROE (%) 75% 73% 63% 49% Net profit 1,171 2,496 4,578 5,984 (excl. minority interest) Net margin (%) 5.9% 9.1% 11.3% 11.9% ROA (%) 10% 12% 18% 18% Minorities 0 0 0 0 ROIC (%) 35% 39% 42% 36% Net attributable 1,170 2,496 4,577 5,984 WACC (%) 9% 9% 12% 12% profit Number of shares PER (x) 45.5 21.3 11.6 8.9 145 300 451 451 (mn) PBR (x) 8.0 7.5 5.4 3.7 EPS (VND, bonus- 2,593 5,529 10,142 13,258 2.7 1.9 1.3 1.1 adjusted) PSR (x) EPS growth (%) 225% 113% 83% 31% EV/EBITDAR (x) 26.2 14.8 9.2 6.8 DPS (VND) - 1,000 3,000 3,000 EV/Sales (x) 2.8 2.1 1.4 1.2 Dividend yield (%) 0.0% 0.6% 2.5% 2.5% Payout ratio (%) 0% 12% 30% 23% (bonus-adjusted)
EBITDAR = Net revenue – (COGs - Dep’t & Amor’s – Rental Cost) – SG&A expenses EBIT = EBITDA – Dep’t & Amor’s Net interest expenses = interest expenses – interest income Other profit/loss consists of other financial income/expenses, profit share from JVs/associates and other income/loss Payout ratio = Dividend paid / Net attributable profit
31-Jan-18 Page 22 Equity Research - KIS VN Bloomberg: KISVN
Contacts:
HCM City Head Office Hanoi Branch Level 3, Maritime Bank Tower Level 6, CTM Tower 180-192 Nguyen Cong Tru St., District 1, HCM City 299 Cau Giay, Cau Giay District, Hanoi Tel: (+84 28) 3914 8585 Tel: (+84 4) 3974 4448 Fax: (+84 28) 3821 6898 Fax: (+84 4) 3974 4501
Equity Research
Mr. Huy Hoang, CFA Mr. Danh Nguyen Mr. Bao Vo Head of Equity Research Associate – Energy & Utilities Associate – Logistics, Aviation & (+84 28) 3914 8585 (x1450) (+84 28) 394 8585 (x1459) Automobile [email protected] [email protected] (+84 28) 3914 8585 (x1460) [email protected]
Ms. Mai Tran Mr. Ha Nguyen Associate – Real Estate and Retail Associate – Pharma, F&B, (+84 28) 3914 8585 (x1461) Chemistry and Agriculture [email protected] (+84 28) 3914 8585 (x1463) [email protected]
Macro Research
Mr. Vien Bach Head of Macro Research (+84 28) 3914 8585 (x1449) [email protected]
Institutional Sales
Ms. Uyen Lam Head of Institutional Sales (+84 28) 3914 8585 (x1444) [email protected]
KIS Vietnam Securities JSC Our Recommendation System
OVERWEIGHT: where we believe prospective 12 months VND total return (including dividends) will be 15% or more. NEUTRAL: where we believe it will be -5% to 15%. UNDERWEIGHT: where we believe it will be -5% or less.
Disclaimer
This report has been issued by the KIS VN Securities Corporation (“KIS”) with the instructional contributions of KIS VN Securities Corporation whose employees are specified in the publication. This report is for information of its institutional and professional customers.
This report is and should not be construed as an offer to sell or a solicitation of an offer to purchase or subscribe for any investment. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Investors are advised make their own financial decisions based on their independent financial advisors as they believe necessary and based on their particular circumstances such as their financial situation, investment objectives and other considerations.
In preparing this report, we have relied upon and assumed the accuracy and completeness of all information available from public and other sources which we believe to be reliable, but which we have not independently verified. KIS makes no express or implied guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information.
Opinions, estimates, and projections expressed are current opinions of the authors as of the original publication date appearing on this report only and the information, including the opinions contained herein, and are subject to change without notice.
KIS and its affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, companies mentioned herein. Further, KIS and its affiliates, and/or their officers, directors and employees involved in the preparation or issuance of this report may, from time to time, have long or short positions in, and buy or sell, the securities, or derivatives (including options) thereof, of companies mentioned herein, or related securities or derivatives in a manner that may be consistent or inconsistent with this report and opinions expressed therein. As a result, investors should be aware that KIS and its affiliates and/or their officers, directors and employees may have a conflict of interest that could affect this report.
This report shall not be copied, reproduced, distributed (in whole or in part) or disclosed by recipients to any other person without the express permission of KIS in writing.