Ferry Riding High on Phu Quoc Island’s Tourism Boom
August 13, 2015
Superdong Fast Ferry Kien Giang JSC (SKG), Transportation
– SKG looks to surpass FY15 guidance by 15-20%, implying EPS growth of 37-43% vs FY14, translating to corresponding FY15 PER of 10.1x-9.7x.
– With the booming tourism in Phu Quoc Island and all the business activities that come with it (requiring worker, cargo, and vehicle transportation), we believe SKG can reach 15-20% EPS growth per annum in the next few years.
– Number of travellers to Phu Quoc surged by 72% in 2014 vs 2013 and 79% in 1H15 vs 1H14. 136 projects, most of them in hospitality, are under construction in Phu Quoc with registered investment capital of USD 6.6b.
– Currently operating eight speedboats, SKG plans to invest in two more (275 passengers each) in 4Q15 and 1Q16, and two ferries in 3Q16 and 2017 to meet demand for passenger, cargo as well as car/truck transportation.
– Healthy balance sheet (net cash = 43% of total assets as at 1H15) means SKG is ready for any capacity expansion.
Dominant position in three operating routes (see Figure 2, page 2), namely Rach Gia – Phu Quoc (100% market share), Ha Tien – Phu Quoc (>80%) and Rach Gia – Nam Du (>50%). SKG wins over competitors on the back of flexible operating hours, superior service quality and wide ticketing network.
The elevation of Phu Quoc Island as Vietnam’s new tourism hub bolsters growth for SKG. Kien Giang province has been working on a plan to establish Phu Quoc as a special economic zone with tourism services and seaport operations as key pillars. Infrastructure in Phu Quoc has been improving significantly with a new airport in 2012, clean water supply facilities and access to national power grid. This has helped attract investments from many local and foreign investors to Phu Quoc including such big brands as Vinpearl, Crowne Plaza and Novotel.
Aggressive capacity expansion plan shows management’s confidence in demand potential. The two speedboats cost USD 1.5m each while the ferries cost USD 4m each. Given the current financial position and SKG’s cash-generative business, we believe these capex can be financed solely by internal equity.
Weak oil price is icing on the cake, as diesel oil accounts for 45-50% of SKG’s COGS. GPM improved greatly in 1H15 vs 1H14, rising by 11.1 percentage points.
1H15 results give hints of what to come. Revenue grew 38% while NPAT jumped 75% vs 1H14, having already accomplished 72% of FY15 AGM-approved guidance.
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