VietJet jumps 20% in trading debut as air-travel demand soars; GIC is airline's 2nd biggest shareholder

VietJet aircrafts are seen at Noi Bai International airport in Hanoi, Vietnam, on Jan 10, 2017.
VietJet aircrafts are seen at Noi Bai International airport in Hanoi, Vietnam, on Jan 10, 2017.PHOTO: REUTERS

HANOI (BLOOMBERG) - VietJet Aviation Joint Stock Co surged by the 20 per cent 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.

GIC, Singapore's sovereign wealth fund, is VietJet's largest shareholder after billionaire founder Nguyen Thi Phuong Thao, who has a stake of more than 60 per cent held directly and through holding companies and other entities, according to exchange filings.

The stock jumped to 108,000 dong as of 9.19am local time, valuing the low-cost carrier at 32.4 trillion dong (S$2 billion) and exceeding the market values of some rivals such as Asiana Airlines. VietJet, known for marketing stunts like bikini-clad flight attendants, listed 300 million shares after an initial public offering at 90,000 dong a share.

Rising living standards and more affordable tickets from budget carriers like VietJet as the nation gradually liberalised its aviation market have helped boost demand for air travel. Vietnam will continue to see a double-digit increase in passenger numbers in the next decade, after annual growth of 17 per cent in the past decade, according to ACB Securities JSC in December.

The listing by Vietnam's only privately owned carrier will also boost the size and liquidity of the country's US$96 billion (S$134 billion) stock market, South-east Asia's second-best performer this year behind Singapore's Straits Times Index. Vietnam's VN Index has climbed 8.1 per cent this year, outpacing the 6 per cent advance in the MSCI South East Asia Index.

Ho Chi Minh City Securities 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 per cent, 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.

VietJet's 2017 profit is poised to rise 30 per cent from 2.3 trillion dong in 2016, the carrier forecast in January. The airline projected its passenger numbers will also climb 30 per cent this year, from 15 million in 2016.