Airport Thailand

Infrastructure Fund unleashes growth. New FV is B155 BUY

Airport 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.