Airports of Thailand

Airports of Thailand Plc (AOT)

PSC hike on course. The AOT board has approved a Bt100 rise in passenger service
charges (PSC) to Bt200 for domestic passengers and to Bt800 for international
passengers against cost of Bt335 per passenger for domestic and Bt556 for
international. The Bt100 rise for domestic passengers is double the original proposal of
Bt50. The company bases this request on higher costs, for investment in such things as
its IT system as well as expansion. The Cabinet has appointed the new DCA
(Department of Civil Aviation) committee, which is expected to give its approval in
December. Subsequent to DCA approval, AOT will have to give airlines advance notice
of 6-12 months before the new PSC can take effect. We estimate the rise in PSC will
add 17-23% to FY2015-16 earnings (vs. +13-18% previously from the earlier rate) and
add incremental value of ~Bt35/share (vs. +Bt30/share earlier) to our DCF-PT, not yet
included in our projection and PT for now.
New president. The AOT board appointed Khun Makin Petplai, a former executive of
Thaicom Plc, as the new president of AOT. He will take up his position in Nov 2013. AOT
believes his engineering background will support the company in terms of technical
and efficiency improvement. The appointment of a new president after a year’s search
will also be positive for continuation of policy.
Benefits handily from airline fleet expansions. AOT is ideally positioned to do very
well off the aggressive airline fleet expansion plans, notably low cost carriers. AAV and
NOK have committed to expand their fleets by more than 20% p.a. to 49 planes and 33
planes, respectively, over the next two years. Beginning this month, a new LCC will be
using AOT’s facilities as well: Thai Lion Air plans to start flights from BKK to Jakarta,
Kuala Lumpur, and Chiang Mai on 29 Nov 2013 and gradually expand to other cities in
the domestic market as well as to China and India in the future. It plans to operate
two planes in 2013, 12 in 2014, 22 in 2015, rising to more than 50 in 2018. At the same
time, the limited landing and takeoff slots, particularly at Phuket and Hadyai airports,
might be a challenge for its route network expansion over the short to medium term.
Maintain BUY. We maintain BUY with mid-14 DCF PT of Bt235. Apart from solid traffic
growth in the near term, the potential upside for a PSC hike and additional concession
revenue from new terminals will be positive catalysts for the share price. Key risks are
changes in traffic movement and expenses/investments related to new terminals.