Airports of Thailand

Robust FY11 earnings. FY11 net profit jumped 24% y-o-y to Bt2.5bn. Excluding the extra losses, the impressive results was led by robust traffic growth (passengers +15. 5%, aircraft +14.4%), cessation of parking and landing discounts and wider margins.  Stripping out Bt1.9bn of extra losses (including Bt1.5bn forex loss and Bt360m asset impairment charges), core profit more than doubled (+156% y-o-y) from a year ago to Bt4.4bn.

Speedy recovery from floods.  Preliminary estimates suggest property damage to amount to Bt1.7bn due to the flooding at Don Muang airport and AOT’s headquarters; the bulk (Bt1.2bn) should be covered by the government and insurance proceeds. AOT is still in the process of finalising the actual losses, which is expected to be completed by end-Dec11. We expect AOT to book losses on assets through its P&L in 1Q12F or 2Q12F, but this will be reversed upon receipt of compensation monies. Nov11 passenger traffic dropped 9% y-o-y to 4.7m, but traffic has picked up rapidly in Dec 11. We expect the traffic recovery to continue which Dec11 posting growth y-o-y.

Reiterate BUY. For FY12F, we have factored in slightly lower traffic assumptions, but this is more than offset by a lower tax rate and operating costs. Accordingly,  FY12F earnings are raised by 11% with TP nudged up to Bt54/share.  AOT’s current valuation remains undemanding at 0.8x FY12F P/BV, lowest among peers. We like AOT for its sustainable growth outlook given its monopolistic positioning, low risk profile, and a beneficiary of Thailand’s tourism growth.