Airport Thailand

Airport Thailand Plc (AOT)

CMPO director agrees with revoking Emergency Decree
The political tension reached its peak in January-February, as the
People's Democratic Reform Committee (PDRC) has seized seven
important areas in Bangkok as rally sites since 17 January (after 28
February, only the rally site at Lumpini has remain active). Meanwhile,
the government enforced the Emergency Decree to prevent violence,
starting from 22 January, affecting foreign tourists' confidence and
pressing AOT's passenger volume in every airport, from 9%yoy growth
in January 2014 to
-1.4% in February and -3% on 1-11 March 2014. However, Chalerm
Yubamrung the CMPO director agreed yesterday that the Emergency
Decree should be revoked, signaling that the government would not
expand it after it expires on 22 March, or it might be revoked even
earlier.
- To take few months to revive after revoking Emergency Decree
If the Emergency Decree is revoked, AOT is likely to regain foreign
tourists' confidence. According to the prior decree, it took two or three
months for AOT's passenger volume to return to normal (see page 2).
Thus, AOT's passenger volume is projected to revive from June 2014 on.
5M14 passenger volume (October - February) is expected to grow by
7.3%yoy (better than our FY2014 passenger volume forecast at 0%).
We revise up AOT's FY2014 passenger volume (October 2013 -
September 2014) from 0% to 7.6%, under the new assumption that
March - May 2014 passenger volume stays flat (growing 0%), then
rebounds at the normal rate throughout the remainder of the year (the
last four months) by 14%yoy (same rate as October 2014). Overall, we
revise up normalized profit forecast by 14% in 2014-2015; we project
normalized profit to grow by 29%yoy in 2014 and 21%yoy in 2015.
- New fair value at B230. Buy
Under the new assumption, though AOT's passenger volume has been
threatened for over half a year by the political turmoil, AOT's normalized
profit is projected to grow strong and improve in 2015, especially as a
result of the AEC liberalization in 2015. To reflect the rebound, we revise
up AOT's fair value (DCF, +0.5% terminal growth) to B230, implying
19.2% upside. We recommend buying.