Infrastructure Fund unleashes growth. New FV is B155 BUYAirport Thailand Plc (AOT)
Profit growth doubles up from previous quarter alongside outstandingly increased passenger volume
The peak of tourism season has boosted AOT's passenger volume and flights
in 1Q13 (ended in December 2012) to grow outstandingly by 13.6% QoQ
and 9.2% QoQ respectively, raising the main revenue which is the total
charge (58% of revenue) by 8% QoQ. Moreover, the reopening of duty-free
area in Don Muang Airport for the 1st quarter has urged the income sharing
by 10% QoQ, also boosting the total revenue by 8.9% QoQ to B8.6bn. Other
than that, the administrative expense has decreased by 14.6% QoQ because
the bonus provision was 1-month less than that of the prior quarter.
Combined with the maintenance expense that has also declined by B400m
from the previous quarter, AOT's 4Q12 norm profit has increased
outstandingly by 36% QoQ to B2.2bn. In addition, 9% depreciation of
JPY/THB in the preceding quarter has helped decreased the loan (in form of
JPY/THB) from 4Q12, resulting in B1.27bn of extraordinary FX gain.
Accordingly, 1Q13 profit would grow from 4Q12 by 2x.
Infrastructure Fund establishment boosts AOT's efficiency for long-term growth
At present, Suvarnabhumi Airport can support 45 million passengers per
year. In fiscal year 2012, the passenger volume in the mentioned airport hit
52 millions which was beyond its capacity, so the government has decided to
relocate low-cost airlines to Don Muang Airport in order to help reduce the
passenger volume in Suvarnabhumi Airport by 10 millions per year.
Nevertheless, the constant growth of passenger volume is projected to bring
over 45 million passengers for Suvarnabhumi Airport this year. The only
method to solve this overwhelming passenger volume is to pick up speed on
constructing Suvarnabhumi Airport phase 2-4 which would take B200bn of
budget. Currently, AOT could invest via loan in the phase 2 which would
require only B62bn. However, the path toward investment in the phase 3 and
4 has become more evident due to our study on AOT's revenue from the
current project to sell into the Infrastructure Fund (IFF). The most likely
choice is the revenue project of Suvarnabhumi phase 1, projected to bring
about over B100bn of cash for the company from this sale. Accordingly, AOT
would be able to work on the expansion of Suvarnabhumi phase 3-4 after the
phase 2 which would substantially help reduce the company's debt expenses.
Accordingly, AOT could constantly expand its capacity to support the
passenger volume from 45 millions to 90 millions in order to support the
growth in 5-10 years ahead. With the brightening plan to support the
passenger volume, we revise up our fiscal 2013 and 2014 net profit forecast
by 6% and 3.8% respectively. Under an assumption of increased passenger
volume and flights, 2013 norm profit would stand at B9.0bn or 29.9%
increase before rising notably the following year by 23% YoY.
New FV reflects long-term growth at B155. Upgrade to "BUY"
According to AOT's more apparent plan to support the long-term growth, we
revise up the new fair value, using DCF and the terminal growth rate at 3.5%
instead of 1.0%, to B155 with 33% upside. We upgrade our recommendation
from "HOLD" to "BUY" for AOT.