Airports of Thailand

Airports of Thailand Plc (AOT)

- May: Sharp 21% YoY passenger growth – 8th month of double-digit growth
- Large support from rise in LCC traffic
- Passengers growing faster than airlines, positive to AOT (high portion of revenue from PSC) and industry (balanced demand and supply)
- Raised FY2013-14 earnings by 5% to reflect strong traffic
- Maintain BUY with a new DCF-based PT of Bt190

Impressive traffic in May 2013. AOT announced impressive traffic growth in May,
with passenger movement growth of +21% YoY – the eighth month of double-digit
growth - and aircraft movement growth of +17% YoY (Figure 1). In 8MFY13 (Oct 2012-
May 2013), AOT’s airports passed through 21% more passengers and 16% more aircraft
landings and takeoffs than in 8MFY12.
Heavier LCC traffic a key support. Apart from strong domestic and international
tourist arrivals (mainly from China, Russia, India and Japan), a pivotal factor is the
jump in traffic from low cost carriers (LCCs) as more and more passengers take in the
cheaper airfares to travel more frequently; LCCs have also broadened the market to
make regular flyers out of non-flyers. In May 2013, LCC passenger movement grew 36%
YoY while LCC aircraft movement grew 23% YoY. In 8MFY13, LCCs passed through
17.6mn passengers or 30% of AOT’s traffic (vs. 29% in 8MFY12), with aircraft movement
of 120,851 takeoffs and landings or 33% of AOT’s traffic (vs. 32% in 8MFY12).
Passenger numbers up more than aircraft, positive to AOT and industry. Based
on AOT’s figures, we find that passenger numbers have grown at a faster pace than
aircraft movement for eight months in a row. This is a positive for AOT as, of its total
revenue in 2012, 43% came from the passenger service charge (PSC) revenue and 16%
from landing and parking fees. This trend is also positive for the air transport industry,
suggesting that demand for travel is still robust despite airline fleet expansion in
existing airlines with a rise in flight frequencies and the opening of new destinations.
Raised earnings. We raised FY2013-14 core earnings by 5% to reflect the stronger
traffic than expected. We estimate passenger traffic growth of 18.2% in FY2013 –
though it already grew 21% in 8MFY13, the high growth early in the fiscal year came
partly off the low base from the floods - and 8.5% in FY2014.
Maintain BUY. In response to our earnings revision, we raise our DCF PT to Bt190
(from Bt170). Though the low season is in 2HFY13 (Apr-Sep 13), AOT’s earnings will be
stronger than usual because of the higher traffic. We like AOT for: 1) its continued solid
traffic, showing double-digit growth since FY2010 (with a burp in FY2012 from the
floods) and 2) as a major beneficiary of the planned aggressive fleet expansion by
airlines in Thailand. More details will be provided after the analyst meeting on June 27.