Airport Thailand

Airport Thailand Plc (AOT)

- Employee bonuses press normalized profit, but extraordinary income to make 4Q13 net profit new high

Blissful tourism and continuous expansion of low-cost airlines are likely to boost
AOT's 4Q13 passenger volume (ended September 2013) by 4.3%qoq and
18%yoy, and AOT's 4Q13 passenger service charge (46% of total income) is
projected to grow by 3.8%qoq. Thus, 4Q13 total income would rise by 2.6%qoq
to B9.1bn. However, in 4Q13, AOT is projected to recognize bonus expense
added from five and half month provision in the previous three quarters. Thus,
AOT's operating cost would rise to 24%qoq, pressing normalized profit to drop by
21%qoq to B2.17bn (FY2013 normalized profit would be B10bn, close to our
forecast). However, B3bn extraordinary income from the reversal of estimated
loss on the impaired assets of Don Muang Airport would be recognized in 4Q13,
as the airport was reopened in early-FY2013. Thus, 4Q13 net profit is projected
to make the quarterly record high at B5.2bn, growing 64%qoq. As AOT's 9M13
extraordinary profit (mostly Fx gain) was B2.9bn, FY2013 net profit is projected
at B16bn, growing two and a half folds from FY2012.
- Blissful tourism. To revise up profit and passenger volume forecast
Domestic purchasing power has decelerated since April 2013. However,
expansion of AAV and NOK at the average rate of 20%/year has supported AOT,
as it has increased AOT's flight service revenue and expanded passenger volume
in Don Muang Airport. Moreover, Chinese tourists have significantly increased,
compensating deceleration in European and American tourists since the
economic crisis, continuously boosting AOT's monthly passenger volume growth
(since April 2013) above 15%yoy. As tourism is likely to be blissful, Chinese
tourists are likely to increase (Thai government will cancel visa for Chinese
tourists soon), and European and American tourists are likely to come back as
economy is recovering, FY2014 passenger volume growth projected at 13% and
FY2015 passenger volume growth projected at 10% would be too conservative.
Thus, we will revise up growth and passenger volume forecast after 4Q13
earnings report. Under current forecast, AOT's FY2014-2015 normalized profit is
projected to grow by 30% and 17%, respectively.
- Fair value has 9% upside, but likely to revise up. "BUY"
AOT's earnings result is likely to be strong due to positive sentiment from high
season for tourism. Though FY2014 fair value (DCF) at B240 has only 9%
upside, the fair value does not include B15-20 added value from earnings
forecast up revision and B40 added value from AOT's request for 14.9% PSC
hike, which is currently waiting for DCA's approval. AOT projects that the hike
would be effective within 1 January 2014, boosting FY2014-2015 profit by 14.7%
and 18.8% from current earnings forecast. We reiterate "BUY".