Airport Thailand

Airport Thailand Plc (AOT)

Tourism brightens. 3Q13 norm profit drops only 15% from high season in 2Q13
AOT’s net profit in 3Q13 (ended June 2013) was B3.1bn, declining 30%qoq mainly
because a Fx gain decreased from B1.3bn in 2Q13 to only B436m in this quarter.
Norm profit was B2.7bn, dropping only 15% from the high season in 2Q13. 3Q13
was the first third quarter in 5 years that AOT got the least effect from the low
season, thanking to continuous expansion of low-cost airlines and improving
tourism industry, especially the coming of Chinese tourists who are less sensitive
to seasonal effect than European tourists (26% of total tourist volume). Chinese
tourists have increased to 18% of total tourist volume from only 11% in the prior
year. Overall, foreign tourist volume in the first 6 months of the year grew
20%yoy. The qoq decrease in norm profit resulted from the service income that
contracted 9.4%qoq along with the number of flights and passenger volume that
fell 2.6%qoq and 10.4%qoq, respectively, in the low season. Cost of service
stayed quite flat from the previous quarter.
- 4Q13 profit to contract from 3Q13 due to bonus expense. FY growth still prosper
Although the profit in 4Q13 (ended September) would contract from 3Q13 due to
annual bonus expense recognition, it is believed to grow significantly from 4Q12.
Moreover, in the long run, the company would thrive notably on the brightened
tourism industry and the continuous expansion of domestic airline business. AOT
has increased the capacity of 2 airports to support the continuous growth, which
are:
1) Suvarnabhumi Airport: Passenger volume at end-2013 (ended September)
is projected as high as 50 million people, exceeding the current capacity of 45
million. However, AOT has solved the overcrowding problem, especially by
expanding the immigration service area, so the management believed the service
capacity would increase in practice. Preliminarily, we believe the airport would be
able to support 30% above its capacity (around 60 million passengers), which is
enough for the growth in the next 2-3 years prior to the opening of Suvarnabhumi
phase 2 in late 2017 with a service capacity of 15 million passengers.
2) Don Muang Airport: The airport has 3 terminals, one of which is being used
for low-cost airlines, with a service capacity of around 18.5 million passengers
(passenger volume at end-2013 would be 16 million). In order to support growth
of low-cost airlines, AOT has planned to open Terminal 2 since May 2014, with a
capacity of 9 million passengers), mounting the total capacity of the airport to
27.5 million (The Terminal 2 will be able to immediately generate income for the
company. Despite the investment of B3.0bn and the amortization of B150-200m a
year, they would be compensated by rental fee income from restaurants, facilities,
and duty free areas in the terminal building). Consequently, when Terminal 2 is
opened, the total capacity would be able to support the growth in the next 2-3
years. AOT also planned to renovate Don Muang Airport's Terminal 3, its last
terminal, which will increase its total capacity from 27.5 million passengers to
36.5 millions. This is a back up plan to support some of exceeding passengers
from Suvarnabhumi Airport if the opening of the phase 2 is delayed or the lowcost
airlines grow more quickly than expected.
- 2014 FV is B240, implying 31% upside
The outlook is prosperous. Norm profit at end-FY2013 is estimated at B10bn,
growing 52% this year and 30% next year. We change to use 2014 fair value,
DCF, at B240, which implies 31% upside. Buy.