Transportation

Transportation

Political unrest hurts high season in 4Q13-1Q14
The current Thai political unrest, started since November 2013, mainly in
Bangkok, Thailand's top tourist destination for foreigners, is not likely to
end in near future. Protestors have planned to shut down many areas in
Bangkok. The turmoil has greatly affected tourism in Thailand, especially in
4Q13 and 1Q14, which are the peak season for tourism and air
transportation sector. Embassies of 39 countries have warned their people
not to travel to Thailand. Some international airlines (e.g. Singapore
Airlines, Cathay Pacific) have decreased the number of their flights to
Thailand, especially flights that the passenger volume does not make a
breakeven.
- Revise down FY2014 profit forecast by 75% to reflect negative political factor
Passenger volume of the companies under our coverage (AOT, AAV and
THAI) has been affected by the political unrest since November 2013,
continuing throughout 1Q14. We have revised down AOT's profit forecast
already. We project that air transportation sector has been depressed by a
decrease in passenger volume and passenger yield (due to sales promotion)
since 4Q13. For THAI, despite worse-than-expected FY2013 normalized
loss, we maintain its FY2013 net loss forecast, as booked impairment cost
of A340 would be lower than expected. However, the remaining impairment
cost might need to be provisioned in 2014. THAI's FY2014 normalized
income is likely to drop due to lower-than-expected passenger volume and
passenger yield, so we revise them down. Similarly, AAV would be affected
throughout 4Q13 and 2014. Overall, due to the down revision of the
companies' earnings forecast, we revise down the sector's net profit by
4.5% in 2013, and 75% in 2014.
- FY2014 net profit to grow 8%yoy. "UNDERWEIGHT"
Due to the political unrest, the sector's net profit is projected to grow only
8%yoy and the sentiment is negative, so air transportation is unattractive.
We reiterate "UNDERWEIGHT", avoiding investment as long as the political
unrest exists. For long-term investment, we favor AOT([email protected]) as it
owns Thailand's six major airports, likely to benefit most from current
situation as major airlines are expanding flights, as well as from new lowcost
airlines. We reiterate to sell THAI([email protected]) for its low
competitiveness. We reiterate "HOLD" for AAV([email protected]). As its operating
cost is the lowest, it is likely to survive in a long term in the fierce
competition.