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Airports of Thailand

Growing among tourism crisis BUY

Airport of Thailand Plc (AOT)

- Strong 2Q14 profit. Profit sharing grows qoq

2Q14 net profit and normalized profit (ended March 2014) was

reported at B3.7bn (6.2% beyond expectation), staying high qoq.

Income sharing rose by 14%qoq; revenue sharing from King

Power’s duty-free business under a concession increased from 15%

to 16% (starting in March 2014). In terms of core income, overall

passenger service charge and landing charge remained flat qoq.

Though passenger volume stayed flat and number of full-service

flight dropped because the political turmoil continued for a full

quarter, total flight volume grew by 2%qoq thanks to low-cost

airlines. Still, total landing charge remained flat qoq because landing

charge for smaller aircrafts was lower than large aircrafts. 1Q14

total revenue grew from 4Q13 by B420m, similar to 1Q14 operating

cost. Thus, AOT’s net profit remained high.

- 3Q14-4Q14 normalized profit to fall in low season, but grow yoy

Despite low season and the possibly prolonged political turmoil in

3Q14 (ending June 2014) and 4Q14 (ending September 2014),

many countries have cancelled their warnings on visiting Thailand

after the emergency decree was revoked, so tourism in Thailand is

likely to improve. AOT’s 3Q14 - 4Q14 passenger volume is not likely

to drop significantly from low passenger base in 2Q14, as tourism

sector has possibly passed its lowest already. 3Q14 earnings result

is expected to weaken slightly qoq (but grow remarkably yoy thanks

to increasing income sharing). Positive factors in 3Q14 are likely to

be booked in 4Q14 as well, but 4Q14 net profit would drop and

make the lowest of 2014 because of personnel bonus expense.

2H14 earnings result is likely to weaken from 1H14. However, as

1H14 net profit has already made up 58% of AOT’s FY2014 earnings

forecast, we maintain FY2014-2015 earnings forecast, projecting

AOT’s normalized profit to grow by 13% (to B12bn) in 2014 and

21% in 2015.

- Fair value implies 20% upside. Buy

AOT has passed its lowest after 2Q14 net profit was affected by the

political tension for a full quarter. Net profit is likely to grow strongly

yoy from 3Q14 on. As FY2014 fair value implies 20% upside, we

recommend buying.


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