Airports of Thailand

Airports of Thailand Plc (AOT) 

 

Strong as expected. AOT reported 1QFY16 (Oct – Dec 2015) net profit of Bt4.6bn (Bt3.24/share), up 18% YoY but down 21% QoQ. Excluding extra items of FX gain/loss in 1QFY15 and 1QFY16 and non-cash reversal of accrued property tax for Don Mueang Airport in 4QFY15 shows core profit growth of 22% YoY and 50% QoQ. Profit was in line with market estimates. 1QFY16 results account for 25% of our FY2016 full-year forecast, meeting the historical average.

 

Highlights for 1QFY16:

 

Revenue was Bt11.8bn, up 12% YoY and 8% QoQ off growth in passenger service charge revenue (43% of total revenue), concession revenue (27% of total revenues) and other service charge revenue (11% of total revenue).

 

Revenue from passenger service charge was Bt5.1bn, up 9% YoY and 7% QoQ, backed by 28.9mn passengers, up 12% YoY and 9% QoQ. Passengers make-up was: 16.2mn international passengers (56% of total passengers), up 8% YoY and 8% QoQ, and 12.8mn domestic passengers (44% of total passengers), up 17% YoY and 10% QoQ, fuelled by strong Thai tourism.

 

Concession revenue was Bt3.2bn, up 19% YoY and 4% QoQ, due to rising passengers and revenue sharing rate.

 

Other service charges revenue was Bt1.2bn, up 18% YoY and 20% QoQ, due to revenue from the Advance Passenger Processing System (APPS) from Dec 1, 2015.

 

Operating expenses came to Bt5.3bn, up 6% YoY but down 15% QoQ. The YoY growth rate was lower than revenue growth rate, reflecting operational leverage. The QoQ drop was due to lower staff and depreciation expenses.

 

Financial health was strong with low interest-bearing debt to equity at 0.3x as of December 2015.

 

Better earnings ahead. We expect better earnings in 2QFY16 (Jan – Mar 16) backed by good total passenger growth: +15% YoY in January (+14% YoY for international passengers and +16% YoY for domestic) and +18% YoY over February 1-13 (+17% YoY for international passengers and +18% YoY for domestic). This is above our FY2016 assumption of +10% YoY and our earnings sensitivity suggests that each 1% growth in AOT’s passengers above our FY2016 assumption raises AOT’s revenue by 0.5% and core profit by 1.6%. Another positive is earnings upside from more concession revenue from new terminals at Don Mueang (officially opening in March 2016) and Phuket airports (officially opening in June 2016). Despite limited upside to our TP, positives from better earnings and earnings upside will give support to AOT’s share price. We maintain our BUY on AOT with TP of Bt390/share.