Airports of Thailand

Airports of Thailand Plc (AOT)

Japan’s weak yen is taking center stage as PM Shinzo Abe aggressively
pursues his campaign promises with policies that effectively weaken
the yen. To date this quarter, the yen has slid by almost 10% against the
baht. In SCBS stock universe, AOT stands out as the top beneficiary. We
estimate the company to post Bt1bn in forex gains, on top of Bt2bn in
core profit, taking its upcoming 1QFY13 (Oct 12-Dec 12) net profit to
Bt3bn, up 136% YoY and 96% QoQ. We see this as a share price catalyst,
particularly if the yen weakens further. BUY.

FY1Q13 set to surge on strong core operations and forex gains. AOT has Bt55bn
in yen-denominated debts, with 22% of this unhedged – meaning hefty forex gains in
FY1Q13 (Oct 12-Dec 12). Thus far this quarter, the yen has weakened by ~10% against
the baht, which translates into Bt1bn in forex gains. Coupled with our forecast of a
strong Bt2bn in core profit, AOT’s FY1Q13 net profit is likely to reach Bt3bn, up 136%
YoY and 96% QoQ.

Strong traffic growth ahead. After fully reopening Don Muang on Oct 1, 2012, AOT
says the number of passengers through Don Muang from low cost carriers has risen-
anticipated, with more chartered/scheduled flights from full service carriers taking the
slots made available by the move of low-cost carriers. AOT expects passenger traffic to
grow 8.8% in FY2013 (Oct 2012-Sep 2013), but we feel this is overly conservative against
the fact that in the first two months of its fiscal year traffic has soared 29.7% - though
this is partly from last year’s low base. We have put our FY2013 assumed growth at
9.3%. Our sensitivity analysis suggests that every 1% increase in traffic growth implies a
2% rise in AOT’s earnings and Bt1/share increase in valuation.

Lower rise in costs than expected from Don Muang. After the full opening of Don
Muang, AOT reports operating costs of ~Bt100mn/month in 2MFY13 (vs.
~Bt50mn/month in FY2012A). This would mean that the rise costs from reopening Don
Muang would be Bt600mn in FY2013, well below our assumed rise of over Bt1bn. On
another note, when it closed Don Muang in FY2009, AOT recorded Bt4bn in impairment
cost for this airport. Since it has reopened Don Muang, it may be able to reverse up to
Bt2.5bn of this (Bt4bn minus depreciation of Bt500mn/year in FY2010-12) depending on
the cash flow from the number of passengers/airlines and the period Don Muang is in
use. AOT said this will be clarified within the next three to four months.

Maintain BUY. We maintain BUY with a 12-month DCF PT of Bt106. Its next quarterly
results (covering October through December 2012, released mid-Feb 2013) – are
positioned to be outstanding with strong operational earnings amplified by the FX
gains, apart from BTS (extra gains from VGI listing, the sale of land and strong core
earnings) and AAV (strong core earnings during high season and lower costs after the
move to Don Muang) in the transportation sector.