Airports of Thailand

Airports of Thailand Plc (AOT)
 

Above estimates: AOT posted a 2Q12 (Jan-March 2012) net profit of Bt2,996m, up by 68% YoY and 138% QoQ. The result was somewhat above our estimate and the consensus, due to a higher FX gain and more extra income than modeled and a smaller asset impairment than expected. Stripping out the FX gain of Bt1,016m, the Bt380m govt subsidy to restore Don Muang Airport and asset impairments of Bt351m, 2Q12 core profit would be Bt1,952m, up by 20% YoY and 25% QoQ—in line with our number and the consensus.
Results highlights: The strong earnings growth was driven by: 1) lower depreciation (down by 41% YoY and 4% QoQ to Bt1,120m), as an IT system at Suvarnabhumi Airport was fully depreciated, 2) air traffic expansion—passenger numbers rose by 9% YoY and 21% QoQ to 19.6m people and aircraft movement by 9% YoY and 8% QoQ to 123,890 flights—and 3) reduced interest expenses, due to less debt.
Outlook: Even though 3Q12 core profit is expected to decline QoQ on seasonality, it should post strong YoY growth, driven by higher air traffic numbers. In April 2012, AOT reported passenger numbers expanded 13% YoY to 6.3m people and aircraft movement rose 8% YoY to 41,295 flights. However, expenses incurred for repairs to Don Muang Airport may dampen the 3Q12 bottom-line.
What’s changed? Even though 1H12 core earnings represent 69% of our FY12 forecast, we maintain our model unchanged—2H12 profit is expected to soften HoH, due to seasonality. However, we expect a consensus projection upgrade, as the 1H12 core result accounts for 73% of the street’s current FY12 number.
Recommendation: We think earnings forecast upgrades together with scope for bottom-line upside from an upward adjustment to passenger service charges (PSC) and/or the relocation of low-cost carriers to Don Muang Airport will catalyze the share price going forward. AOT currently trades at a YE12 PBV of 1.1x (1.0SD above its long-term average of 0.9x), a discount to the regional mean of 1.3x.