Airports of Thailand

Airports of Thailand Plc (AOT)

Double-digit traffic growth in Oct 2013. Yesterday, AOT announced October
passenger growth of 14% YoY, slowing from the 20% seen over the past 12 months,
partly due to China’s rules controlling zero dollar tours in place since Oct 1 but still
above our estimate of 10% in FY2014 (Oct 2013-Sep 2014). We continue positive on
AOT’s traffic growth, backed by 1) continued strong demand in regional and domestic
markets; 2) limited adverse effect related to zero dollar tours - only 2-3 months (i.e.
Oct-Dec 2013) by tour operator estimates; 3) expansion at congested airports, i.e.
Phuket and Don Muang (terminal 2) in mid-2014; 4) aggressive fleet expansion by
airlines in Thailand (i.e. THAI, AAV, NOK, and a new airline, Thai Lion Air, which will start
operations in Dec 2013).
4QFY13F earnings to hit record high. We expect 4QFY13F to be a record high of
Bt4.8bn (+215% YoY and +51% QoQ), with Bt3bn extra gain from the reversal of
impairment loss after the full reopening of Don Muang and Bt1.8bn core earnings
(+17% YoY but -34% QoQ). YoY growth is provided by higher traffic (passenger
movement, +18% YoY, and aircraft movement, +17% YoY) and better cost control after
fully reopening Don Muang on Oct 1, 2012. The fall QoQ came from seasonal bonus
expenses (11-month bonus announced for FY2013 vs 4.5-month bonus already
reserved as expenses in 9MFY13A). Results will be released on 29 November 2013.
1QFY14F core earnings to edge up. We expect the positive momentum to continue
into 1QFY14F with growth QoQ from seasonality and YoY from stronger traffic growth.
Also aiding YoY figures is the reduction to 20% on October 1, 2013 in the discount for
landing and parking fees at Don Muang airport from 30% given since reopening Don
Muang on Oct 1, 2012.
Maintain BUY. Including the recording of Bt3bn extra gain from the reversal of
impairment loss for Don Muang, we raise our FY2013 net profit by 23%. We maintain
BUY with a mid-14 DCF PT of Bt235. We like AOT for its strong traffic, backed by rapid
expansion by current LCCs and addition of new airlines, and potential upside from the
additional concession revenue from more terminals in FY2014.