We attended SCS’s 2024 AGM in HCMC. We see slight downside risks to our 2024F NPAT, pending a fuller review. Approved proposals and our takeaways are as follows.

1. 2024 guidance:

- Cargo volume: 248,000 tonnes; +23% YoY; 99% of our 2024F.

+ International: 190,000 tonnes; +27% YoY; 98% of our 2024F.

+ Domestic: 58,000 tonnes, +13%; 100% of our 2024F.

- Revenue: VND968bn; +18% YoY; 95% of our 2024F.

- PBT: VND680bn; + 21% YoY; 83% of our 2024F.

2. Vietcap’s view on the 2024 targets:

- International volume growth: SCS gained major client Qatar Airways from its competitor TCS. Qatar Airways transports 3,000-3,500 tonnes/month, which accounts for the largest air cargo volume at Tan Son Nhat International Airport.

- Domestic volume growth: Vietjet Air (SCS's client) gained cargo share from Vietnam Airlines (TCS's client).

- Profit margin compression:

+ The concession paid to the State rose from 1.5% of cargo revenue to 2.0% in July 2024 and could further increase to 2.5% during the next few years.

+ SCS may have offered favorable prices to attract new clients that support cargo volume growth.

+ Management set conservative profit targets similar to its track record.

3. Investment projects:

SCS no longer pursues M&A with air cargo terminal operators in Hanoi. One of its potential targets is undergoing supervision from the Government. Another decided not to proceed with the deal because the market situation in Hanoi has become more favorable over time.

SCS is still seeking approval from the HCMC authorities and the military for the construction of a second office building. There have been no new updates on this project.

Long Thanh Airport cargo terminals:

- First terminal: SCS aims to own ~20% and become the only operator of this terminal via bidding. ACV should own the majority of the terminal and share the remaining stake among several air cargo operators in Vietnam.

- Second terminal: SCS waits for more details from the Ministry of Transport in May and June 2024.

4. Proposed 2025-2027 ESOP (for each year):

0.5% of outstanding shares if PBT growth achieves 10%.

1.0% of outstanding shares if PBT growth achieves 20%.

Price: No less than 20% of the 10-day average of the market share price before the BOD's decision to issue each ESOP round.

Lock-up period: 1 year for 50% of the issued shares, 2 years for the remaining 50%.

5. Proposed dividends:

- VND5,000/share for FY2023.

- 30% on par value (in cash or in stock) for FY 2024.