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Airport Thailand

To revoke Emergency Decree. Buy BUY

Airport Thailand Plc (AOT)

CMPO director agrees with revoking Emergency Decree

The political tension reached its peak in January-February, as the

People’s Democratic Reform Committee (PDRC) has seized seven

important areas in Bangkok as rally sites since 17 January (after 28

February, only the rally site at Lumpini has remain active). Meanwhile,

the government enforced the Emergency Decree to prevent violence,

starting from 22 January, affecting foreign tourists’ confidence and

pressing AOT’s passenger volume in every airport, from 9%yoy growth

in January 2014 to

-1.4% in February and -3% on 1-11 March 2014. However, Chalerm

Yubamrung the CMPO director agreed yesterday that the Emergency

Decree should be revoked, signaling that the government would not

expand it after it expires on 22 March, or it might be revoked even

earlier.

- To take few months to revive after revoking Emergency Decree

If the Emergency Decree is revoked, AOT is likely to regain foreign

tourists’ confidence. According to the prior decree, it took two or three

months for AOT’s passenger volume to return to normal (see page 2).

Thus, AOT’s passenger volume is projected to revive from June 2014 on.

5M14 passenger volume (October - February) is expected to grow by

7.3%yoy (better than our FY2014 passenger volume forecast at 0%).

We revise up AOT’s FY2014 passenger volume (October 2013 -

September 2014) from 0% to 7.6%, under the new assumption that

March - May 2014 passenger volume stays flat (growing 0%), then

rebounds at the normal rate throughout the remainder of the year (the

last four months) by 14%yoy (same rate as October 2014). Overall, we

revise up normalized profit forecast by 14% in 2014-2015; we project

normalized profit to grow by 29%yoy in 2014 and 21%yoy in 2015.

- New fair value at B230. Buy

Under the new assumption, though AOT’s passenger volume has been

threatened for over half a year by the political turmoil, AOT’s normalized

profit is projected to grow strong and improve in 2015, especially as a

result of the AEC liberalization in 2015. To reflect the rebound, we revise

up AOT’s fair value (DCF, +0.5% terminal growth) to B230, implying

19.2% upside. We recommend buying.




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