Tuesday, September 29, 2020

AOT share price plummets 8.7% after move to assist King Power Duty free

Aug 04. 2020
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By The Nation

Almost Bt80 billion was wiped off the value of Airports of Thailand (AOT) today when its stock price dropped 8.7 per cent to Bt49.75 per share following the board's move to assist King Power Duty Free (KPD) without first consulting shareholders.

AOT's board of directors approved King Power's minimum guaranteed payment method based on the number of passengers at Suvarnabhumi Airport, which remains lower than the estimate of the duty free giant.

Also, AOT extended the duty free area renovation period from September 28 this year to March 31, 2022, because KPD and its Suvarnabhumi operation were unable to contact trade partners to prepare for reopening of duty free outlets.

After the board approved both plans, investors sold a total of 6.5 million stocks via non-voting depository receipts (NVDR) on July 30-31. However, investors made net buys of 9.2 million stocks if considering transactions via NVDR throughout July this year.

A stock analyst said AOT's share price was under pressure because the company had not followed the bidding contract, while the number of tourists visiting Thailand would return to normal in 2022 or 2024. The analyst said his brokerage would change its investment recommendations if the stock price drop lower than the target price.

"We do not agree with AOT taking the move without first hearing shareholders' comments," the analyst said. "AOT should find better ways to relieve KPD's pressure from the Covid-19 pandemic."

The analyst said AOT's move to extend the duty free area renovation period would not affect the brokerage’s net profit forecast, but the company's move to change the minimum guaranteed payment method would cause its 2022 net profit forecast to drop by 5.3 per cent.

"We advise investors to sell AOT stocks," the analyst added.

Meanwhile, a stock analyst at Yuanta Securities said AOT's move to change the minimum guaranteed payment method affected the market's profit forecast because the company would recognise revenue from the bidding contract after 2022 when the number of foreign tourists returns to 66 million people, adding that this move would affect the market's 2023 profit forecast if the number of tourists increases slowly.

"We expect the number of tourists to hit a new high between 2024 and 2025, five years after the Covid-19 pandemic emerged," the analyst said.

The analyst said the securities company had maintained AOT's profit forecast for 2019 to 2020 and for 2020 to 2021 at Bt2.3 billion and Bt5 billion respectively.

However, we cut the company's profit forecast from 2021 to 2022 to Bt14 billion due to the abovementioned move," the analyst said. "As a result, we cut the fair price at the end of 2019 and 2020 to Bt52.50 per share."

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