Why are aviation shares not attractive?

While investors are hunting for shares of the companies in the fields of banking, finance, oil and gas, real estate or rubber, they seem to ignore aviation companies’ shares, though aviation is thought to be an industry with high potential.

The Vietnam Airlines Corporation (VNA) has completed the equitisation of all its 14 independent companies. As planned, by 2010, the state will not hold the controlling stakes in the companies any more. Noi Bai Air Catering Joint Stock Company, Airimex (import – export company), the Noi Bai Cargo Terminal Service Company (NCTS), and Noi Bai Airport Service Company (NASCO) once were the well known names among OTC investors, but they later did not draw the attention of investors any more when the investors had many other choices.

Though Vietnam Airlines’ companies have been equitised, none of them has listed on the bourse yet. Only two of the 14 equitised companies, NASCO and NCTS, seem to have well prepared for listing on the stock market, while other companies are still building the roadmap and preparing for the listing.

However, NASCO and NCTS both are facing big difficulties. The former cannot meet the requirement on chartered capital (its plan to raise chartered capital by issuing more shares has not been approved by VNA). Therefore, though having met other requirements: became a public company, had three consecutive profitable years after the equitisation, and had no cumulative losses, it still cannot list on the bourse.

One of the reasons that makes aviation shares unattractive in the eyes of investors is the difficulty in trading and assigning shares (the shares have been held by the shareholders who are the staffs of the companies, and will only be able to transfer shares after a certain time).

The prices of several share items of the companies belonging to VNA are as follows: Airimex VND40,000/share, APLAPCO VND46,000, VASCO VND73,000, but the successful transactions were very few.

An analyst said that aviation shares are not attractive because most of the companies have just been equitised, have not listed on the bourse yet, and have few transactions. In addition, many outside investors could not join the auctions of the companies’ shares or become shareholders of the companies. Meanwhile, the state still holds the controlling stakes in these companies, except the Air Plastics Joint Stock Company. Big investors still hesitate to inject money in the companies because they cannot hold a big proportion of shares and cannot have a decisive voice in the operation of the companies.

Source: VNE