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Airport Thailand

Revise down fair value to B191. "HOLD"

Airport Thailand Plc (AOT)

- Political unrest presses passenger volume growth from November 2013 on

According to the meeting on FY2013 earnings report (ended September 2013),

AOT’s passenger volume growth has been pressed by the political unrest. Prior to

the unrest, AOT’s October passenger volume growth for every airport was strong

at 14%yoy. However, it declined to 10%yoy in November, and contracted by

2.9% in early-December. Thus, 1Q14 passenger volume growth (ends December

2013) is projected by AOT's management at 6-7%yoy. It is still hard to predict

how long the political turmoil will take, but it is expected not to affect AOT for

too long. Preliminarily, FY2014 passenger volume growth (ends September

2014) is projected by the company's management at 6-7% (lower than our

expectation at 13%yoy). However, insignificant passenger volume growth would

be compensated by healthy growth in flight volume of 16%yoy in 1Q14 that

benefits from expansion of Thailand's international airlines. Thus, AOT's

management projects FY2014 flight volume growth at 10-15%yoy (better than

our expectation at 10%).

- Revise down FY2014-2015 profit forecast by 17.2%p.a. due to political unrest

Due to the above-mentioned negative political factors, we estimate AOT's

earnings in the tourism season of FY2014 (1Q14-2Q14) to be dull. We, therefore,

maintain our view, projecting the normalized profit growth in 1Q14 to be weak

despite not getting an impact from the one-time bonus payment like in 4Q13. At

the same time, the net profit is projected to drop as there will not be an

extraordinary income like in 4Q13 (a reversal of Don Mueang Airport's

impairment after its reopening). For 2Q14, if the current political conflict still

does not unfold, the profit might only stabilize from 1Q14, while the profit in

3Q14-4Q14 might weaken from 2Q14 (April - September) when off-season

period approaches. Basing on a conservative method, we revise down our

forecast for the passenger volume in 2014 from 13% growth to only flat growth,

and revise up the flight volume growth in FY2014 to 14percent from 10%. As a result,

new FY2014-2015 normalized profit decrease from the previous forecast by

17.2% a year. Under the new forecast, normalized profit would grow 14%yoy to

B11bn in FY2014 and 19%yoy in FY2015.

- New fair value is B191. Limited upside. "HOLD"

Under the new forecast, we derive 2014 fair value by using DCF (WACC of

9.7%). However, in order to reflect lower normalized profit growth in FY2014, we

decrease the terminal growth from 3.5% to 3.0%, resulting in new FY2014 fair

value of B191/share, from B240 previously, which implies only 11% upside from

the current share price, while the share price is still suppressed by the possibly

prolonged political tension. Reiterate HOLD.




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