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Samart Aviation (SAV TB — US$216 million) is the exclusive air navigation service provider for Cambodia.
Such service providers use control towers, radio systems, and surveillance systems to keep air traffic safe and orderly. Its 36o staff arrange the sequencing of flights and grant clearance for takeoff and landing. It also manages all en-route traffic through Cambodian airspace, so-called "overflight traffic".
Such companies use control towers, radio systems, surveillance systems, etc to keep air traffic safe and orderly. Its 360 staff help sequence flights and grant clearance for takeoff and landing. It also manages all en-route traffic flying through Cambodian airspace — so-called "overflight" traffic.
In return, the company receives a US$400-700 fee per flight, with tariff rate regulated by the Cambodian government. Takeoffs and landings cost more, and overflights less. But in any case, it's a virtual toll road booth for air travel through Cambodia.
The initial concession lasted from 2002 to 2017. But thanks to several extensions, the current concession is now set to continue until 2051. And the concession may be extended yet again.
What's unique about the concession is that Cambodian air traffic is booming. Back in 2002, total flight movements in Cambodia were just 31,000 per year. In 2019, that number had risen to 134,000. There was a temporary dip in traffic during COVID-19, but we're now almost back to the pre-COVID level.
Third-party research firms estimate that air traffic will continue to grow at a 9-10% annual rate. Cambodia Airways, as well as Vietjet and Vietnam Airlines, are set to grow their fleets by 30-40% over the next few years. And the construction of completely new state-of-the-art airports in Phnom Penh and Ho Chi Minh City in 2025 and 2026 will further increase capacity.
The company has confirmed to me that they can handle up to 200,00 flight movements per year, without hiring any additional staff. That means that any incremental revenue will be margin accretive, pushing the operating margin somewhat closer to the gross profit margin of 50%.
Despite the outlook, the share price has been on a downward trajectory:
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