Airports of Thailand

4QFY14 (July – Sep 2014) net profit at Bt2.3bn (Bt1.59/share), down 57% YoY and 8% QoQ. Excluding the extra gains of Bt3.5bn in 4QFY13 (mainly reversal of impairment loss on assets at Don Mueang) and extra gains of Bt158mn in 4QFY14 (mainly FX), 4QFY14 core profit was Bt2.1bn, up 18% YoY but down 17% QoQ. Earnings were as expected by SCBS and the market. This gave FY2014 (Oct 2013 – Sep 2014) net profit of Bt12bn, down 25% YoY. Excluding extra items, FY2014 core profit was up 21% YoY.

Highlights: 

- 4QFY14 revenue was Bt9.0bn, down 5% YoY but up 4% QoQ. The YoY decline came from lower passenger service charge revenue and the QoQ rise from higher concession revenue. FY2014 revenue was Bt38bn, up 2% YoY.

- 4QFY14 revenue from passenger service charges (43% of total revenue) slid 10% YoY but gained 4% QoQ, on total passengers of 21.4mn, down 1% YoY but up 6% QoQ. FY2014 revenue from passenger service charges was Bt16bn, down 4% YoY. Total FY2014 passengers numbered 87.6mn, up 2% YoY, with international passengers falling 6% YoY but domestic rising 14% YoY.

 - 4QFY14 concession revenue (26% of total revenue) was Bt2.4bn, down 4% YoY but up 8% QoQ. In FY2014, concession revenue was Bt9.8bn, up 5% YoY, mainly from higher revenue share from duty-free shops.

- 4QFY14 operating expenses came to Bt5.8bn, flat YoY, as higher depreciation expenses were offset by lower personnel expenses (staff bonus was 6.5 months versus 11 months last year) but up 21% QoQ from year-end adjustment. In FY2014, operating expenses were Bt20bn, up 5% YoY.

- AOT’s financial health is strong with low interest-bearing debt to equity at 0.4x as of Sep 2014.

Outlook - Passengers are returning. Thai tourism is recovering and AOT, as Thailand’s lead airport operator, is first in the door to benefit. Total passengers through AOT airports grew 11.2% YoY in October and the strong momentum continued through November. We are forecasting total passenger growth at 15% YoY in FY2015, bouncing from 2% YoY growth in FY2014. Our sensitivity analysis suggests that a 5% incremental growth in AOT’s passengers above our FY2015 assumption increases its core profit by 7%. We like AOT, as it is poised to benefit strongly from the recovery of tourism when more aircraft movement will bring more passengers. AOT is one of our three top picks in Thai tourism (ERW and AAV are the other two) and we rate it BUY with TP of Bt330/share.