Initiate Coverage: AOT

Transcription

1 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Initiate Coverage: AOT Airports of Thailand PCL (AOT) Restoring tourists happiness We initiate the coverage of AOT with a BUY recommendation. As a sole airport operator in Thailand, AOT will be the major participant of the government s long-term infrastructure plan with several projects going on and in the pipeline that will markedly boost its capacity to meet rapidly rising demand in the region. We project a 24% CAGR of AOT s normalized profits and EPS during FY , mainly driven by the country s strong tourism industry, lucrative business of low cost carriers (LCCs), the upcoming ASEAN economic integration in the ASEAN Economic Community (AEC). Expect exponential 24% CAGR of a normalized profit during FY We expect AOT s normalized profit at Bt13.0bn in FY2014 (Oct Sep 2014) with an increase of 31%YoY, thanks to rising non-aeronautical revenue and tax savings from the reduction in corporate income tax rate from 23% in 2013 to 20% starting from January 1, For FY , we expect AOT to post a strong 21.0% CAGR of normalized earnings growth due to the following factors. (1) The number of foreign passengers in FY2015 (Oct 2014 Sep 2015) should pick up strongly from an abnormally low level in FY2014 due to political unrest in 1H14. (2) Aircraft movements should accelerate due to faster growth of low cost carriers (LCCs) and the commencement of the AEC in Airbus alone will deliver 230 new aircraft to airlines operating in Southeast Asia within 2014, which represents 11.5%YoY growth BUY Current Price Bt239 Target Price (FY2015) Bt278 Upside/(Downside) +16% Consensus Bt239 Sector Transportation & Logistics Paid-up Shares (bn.shares) 1.4 Market Capitalization (Btbn) Free Float (%) 30.0 Major Shareholders (%) 1. Ministry of Finance Thai NVDR 5.2 Financial Hilights FY2013 FY2014E FY2015E FY2016E Revenue 36,594 38,435 44,344 49,085 EPS (Bt) EPS Growth (%) 43.1% 31.8% 28.8% 13.6% P/E (x) P/BV(x) DPS (Bt) Div. Yield (%) 2.9% 1.7% 1.7% 2.0% Source: SET, AWS estimates Multiple Earnings of AOT in the industry s capacity. (3) The Terminal 2 at Don Mueang International Airport (DMK) and a new terminal building at Phuket International Airport (HKT) will be ready for opening in the second half of the calendar year AOT is the major participant in government infrastructure development plan. As a sole airport operator in Thailand, AOT will be the major participant of the government s long-term infrastructure plan. Moreover, given its abundant cash on hand of over Bt45bn at present and strong Index x 34x 31x 28x 25x 22x 19x 16x internal cash generating ability of over Bt20bn each year, AOT should be in a position to invest heavily without the needs to come to markets for fresh cash, either equity or debt. Major projects in the pipeline includes: (1) the new multi-terminal at Suvarnabhumi International Airport (BKK) including runway #3 with 300 Bt Relative Performance 1900 combined investment of Bt39.4bn; (2) DMK phase 3 with total investment of Bt8.0bn and (3) HKT phase 2 with total investment of Bt3.8bn. These projects will support ASEAN s open skies initiative in 2015 and promote growth to the Thai aviation industry in the long run. Moreover, these projects will not only help expand the capacity of AOT s airports and aeronautical revenues but they will also enhance growth of non-aeronautical revenues, hence a higher operating profit margin AOT ( LHS) SET Initiate with a BUY recommendation, 2015 fair value at Bt278.0 Although the share price has risen by over 40% since the beginning of the year, we believe that AOT is well undervalued still. Based on the historical PE method, AOT has traded with a mean PE of 26x. Given our 2015EPS estimate of Bt11.8, the share could trade up to as high as Bt306 by the end of Based on Lynch s ratio method, with a 24% CAGR of EPS estimate in the next three years, the share could trade up to Bt283 in the next twelve months. For the conservative purpose, we have derived the target price in 2015 for AOT at Bt278 by using the discounted cash flow method (DCF). At the current share price of Mr. Warut Siwasariyanon Tel: Warut.Si@asiawealth.co.th Ms. Sukanya Leelarwerachai Tel: Sukanya.Lei@asiawealth.co.th Bt239, our 2015 target price offers a 16% upside. BUY 1

2 Robust earnings growth from FY2014 to FY2016 AOT reported normalized profit in 9MFY2014 (October June 2014) increased by 23%YoY to Bt9.8bn, thanks to its remarkable ability to boost non-aeronautical revenue (+9%YoY) and efficient cost control. Moreover, AOT s income tax expenses also dropped YoY as the company still benefited by one quarter from the reduction in corporate income tax rate from 23% in the calendar year 2012 to 20% starting from January 1, A normalized profit margin improved to 33% in 9MFY2014 from 25% at the same period of the prior year. Currently, both airlines and passenger activities have picked up since July 2014 after the political situations stabilized. The NCPO has announced policy to rapidly boost Thai tourism in the second half of the calendar year Therefore, for FY2014, we expect operating revenue to slightly grow by 5.0%YoY to Bt38.4bn but a normalized net profit to surge by 31%YoY to Bt13.0bn. In addition, the internal factors driving AOT s earning in the near term include: 1) a lower discount rate on landing and parking charges at Don Mueang International Airport (DMK) from 20% in FY2014 to 10% in FY2015 and no discount beyond FY2015, 2) an increase in non-aeronautical revenue from rental space after the opening of terminal 2 at DMK and new terminal building at Phuket International airport (HKT) in the second half of the calendar year Strong YoY pickup in the number of foreign passengers in FY2015 from lower base in FY2014. Total International passenger movements of AOT in the past 10 months (Oct 13 to Jul 14) dropped by 5.0%YoY from a CAGR during FY2011-FY2013 of 14.8%YoY. This was a result of the political turmoil in 1H14 together with the martial law imposed by the NCPO from May 20. However, both airlines and passenger activities have already picked up since July 2014 after the political situations stabilized. The missing of natural growth of passengers in FY2014 should translate to a strong growth rate of approximately 20%YoY for FY2015 and return to a normal rate of 8-10%YoY in FY Improved sentiment from government s measurements to boost international and domestic tourism The government s measures to promote tourism both international and domestic are as follows. (1) Exempt visa fees Bt1,000 for Chinese and Taiwanese tourists between August 9 and November 8, 2014: In 8 months (Jan to Aug 2014), the number of foreign tourist arrivals dropped by 11%YoY, compared with an average growth rate of 19% in the past three years while the number of tourists from China dropped 19%YoY. (2) Extend the number of days tourists can stay by another 30 days, effective from August 29, 2014: Holidaymakers from 49 countries who are allowed to enter Thailand under a 30-day visa can now stay for 60 days in total. This measurement is aimed to boost revenue from tourism. (3) Impending tax relief for Thai travelers: The measurement will allow Thai travelers to deduct up to Bt15,000/year in domestic travel costs from their taxable personal income, and also for corporations to claim up to twice the expenses of seminars and trainings. The measures are expected to take effect this year and run through the end of next year. 2

3 Moreover, many governments official warnings to their citizens to avoid travelling to Thailand have still be in effect after the Coup on May 22. The lifting of the martial law, now in effect, would significantly boost the number of foreign passengers of AOT, especially at Suvarnabhumi and Don Mueang International Airports, where foreign tourist arrivals drastically dropped by 18%YoY in the past eight months of the year. Figure 1: International Tourists Arrivals to Thailand by nationality (Unit: mn) M2013 8M2014 %YoY East Asia % -China % Europe % Americas % Total % % Growth -13% 21% 16% 19% Source: Immigration Bureau, Police Department. Potential growth of low cost carriers (LCCs) from regional economic integration. The Asia-Pacific aviation industry has tremendously enjoyed healthy economic growth in the region at least in the past ten years. Going forward, its outlook in the next five year should continue to be very bright with ASEAN economic integration in 2015 through ASEAN Economic Community Treaty. Boeing estimates that air transportation in Asia-Pacific will continue to grow during The aircraft producer project that the number of aircraft in the region need to increase by 3 times from 5,090 in 2012 to 14,750 within 2032 (CAGR 5.5%) to be able to support passenger growth in the region. The outlook is consistent with that of Airbus who has a schedule to deliver 230 new aircraft to the airlines operating in Southeast Asia in These now aircraft alone will add 11.5% in new capacity to the industry. Moreover, the UN World Tourism Organization forecast that Asia-Pacific region will host the world s largest annual increase in inbound tourists through 2030, bringing the regional share to 30% of total global tourists. In addition, ASEAN s open skies policy in 2015 will increase competition in the region s aviation industry by reducing restrictions on where airlines can fly and land. AOT is considered to be among major beneficiaries of a marked increase in intraregional travelling from its six international airports, not only Suvarnnabhumi and Don Mueang Airport but also other regional airports. AOT is the major participant in government s infrastructure development plan. Most urgent development projects of AOT (see Figure 2) are expected to be approved by the new interim government. These projects are considered to be potential growth factors for AOT in the long term (beyond FY2017). They will not only enhance AOT s airport capacity to handle more aircraft and passengers but also increase non-aeronautical revenues which will improve AOT s operating profit margin. The new sources of non-aero revenue will come from more commercial areas for rent, more opportunities for granting concessions as well as potential hikes in revenue-sharing rates and minimum guarantee payment each year. The company targets an increase in non-aeronautical proportion of revenue from the current 41% of total revenue to 50% within FY2019. The ultimate target is 60% which is an average rate of other developed airports. 3

4 Figure 2: AOT s airports expansion roadmap Airports Amount (Btmn) Capacity (Passengers mn/year) Timing 1. Suvarnabhumi BKK - 45 Current Multi Terminal 24, Phase 2 - Optional [62,500] [15] 2018 Phase 3 16, Total 80.0 Runway 3 15, flight/ hour Don Mueang DMK Current Phase 2 3, Phase 3 8, Total Phuket HKT Current Phase 1 5, Phase 2 3, Total Chiang Mai CNX - 8 Current 5. Chiang Rai HDY Current 6. Hat Yai CEI - 3 Current All airports Airport city (Interim feasible study) Amount (Btmn) Timing HKT Interim DIY Airport service Airport Operating Park 5, DMK DIY Airport Service 9, HKT DIY Airport service 4, Source: AOT, AWS adjusted timing Total 18,342.0 Initiate with a BUY recommendation, 2015 fair value at Bt278.0 Although the share price has risen by over 40% since the beginning of the year, we believe the share is still undervalued. We expect growth of passenger movement is 20%YoY and aircraft movement is 15%YoY in FY2015 due to the low base effect in FY2014 and returned to normalcy at 10%YoY in FY2016. The company should post revenue growth of 15%YoY to B44.3bn in FY2015 and growth of 11%YoY to Bt49.1bn in FY2016 with normalized net profit growth of 29%YoY to Bt16.9bn in FY2015 and 14%YoY to Bt19.2bn in FY2016. Based on the historical PE method, AOT has traded with a mean PE of 26x. Given our 2015EPS estimate of Bt11.8, the share could trade up to as high as Bt306 by the end of Based on Lynch s ratio method, with a 24% CAGR of EPS estimate in the next three years, the share could trade up to Bt283 in the next twelve months. For the conservative purpose, we have derived the target price in 2015 for AOT at Bt278 by using the discounted cash flow method (DCF). At the current share price of Bt239, our 2015 target price offers a 16% upside. BUY 4

5 Figure 3: Operating revenue breakdown Figure 4: 9M FY2014 revenue proportion in percentage Btmn 60,000 50,000 40,000 36, % 38, % 44,344 49, % 14.3% 30,000 20,000 30, % 42.9% 10, % 1.5% - FY2012 FY2013 FY2014E FY2015E FY2016E LPC PSC ASC OPR SVR CCR Source: AOT, AWS estimates Figure 5: Normalized Profit versus Normalized EBITDA Figure 6: Monthly Air Traffic Movements FY FY2014 Unit : Btmn CAGR +25% 28,769 32,046 20,076 24,128 CAGR +24% 16,872 19,171 13,048 9,952 FY2013 FY2014E FY2015E FY2016E Normalized Profit Normalized EBITDA Source: AOT, AWS estimates Hidden growth factors The following hidden growth factors could take place in the medium and long term. (1) There is a long-overdue upward adjustments in a passenger service charge (PSC) up from Bt700 per passenger to Bt800 for International passengers and from Bt100 per passenger to Bt200 for domestic passengers, due to the political unrest. (2) The Transport Ministry has a plan to transfer some airports operating under the Department of Civil Aviation (DCA) to AOT, such as Krabi, Udon Thani and Ubon Rachathani airports. AoT may develop U Tapao Airports as commercial airport too. (3) AOT also plans to develop the Airport City projects at Don Muang, Suvarnabhumi and Phuket international airports. The details of investments and construction have not yet been disclosed. However, according to AOT s plan, if approved, the construction of these gigantic projects will run from 2015 to 2019 and they will significantly boost non-aeronautical revenues from

6 Minor risks but should be kept in mind 1. The missing of Russian passengers who have been the third largest group of foreign tourists visiting Thailand will, to some extent, adversely affect airport revenues. Economic and military sanctions imposed by the West on Moscow from geopolitical conflicts in Ukraine have seriously hurt the Russian economy. The number of tourist arrivals from Russia to Thailand rose by 4.8% to 1.1 million in 8M14, but the worsening dispute is likely to curb Russian arrivals during the rest of the year. 2. The delay of any airport development projects will hinder AOT s capacity expansion and thus limit its opportunities to be exploited from potential growth in the Asia-Pacific Region. 3. Unexpected shocks such as terrorist, disease outbreak and political unrest may hurt AOT s earnings. However, AOT s strategy to strike the balance between aeronautical and nonaeronautical revenues has proved to be effective. AOT reported a normalized profit in 9MFY2014 increased by 23%YoY to Bt9.8bn despite political unrest in 1H14. Exhibit 1: Detail of Airport Revenue Source: SET, AWS estimates 6

7 Key Financial Ratios FY2013 FY2014E FY2015E FY2016E Operating Revenue Growth (%) 19.1% 5.0% 15.4% 10.7% Net Profit Growth (%) * 43.1% 31.3% 29.3% 13.6% EPS Growth (%) * 43.1% 31.8% 28.8% 13.6% Operating Profit Margin (%) 41.2% 37.4% 42.2% 43.4% EBITDA Margin (%) 54.9% 63.0% 64.9% 65.3% Net Profit Margin (%) 27.1% 33.9% 38.0% 39.1% Effective tax rate (%) 22.9% 20.8% 20.0% 20.0% ROA (%) 6.5% 8.4% 10.3% 11.1% ROE (%) 10.8% 13.3% 15.5% 15.8% Net Debt to Equity (x) EPS (Bt) * BVPS (Bt) DPS (Bt) Net Dividend Payout Ratio 40.2% 40.0% 50.0% 40.0% P/E (x) P/BV (x) EV/EBITDA (x) Div. Yield (%) 2.9% 1.6% 1.7% 1.9% * Earning used is net profit (excluding one-off items) Income Statement Unit: Btmn FY2013 FY2014E FY2015E FY2016E Operating Revenue 36, , , ,084.9 Interest Income 1, , , ,387.0 Revenue 41, , , ,648.9 Operating Expense 21, , , ,786.2 Operating Profit 15, , , ,298.7 EBITDA* 20, , , ,046.3 Tax 4, , , ,841.0 Interest Expenses 1, , , ,638.3 Net Profit* 9, , , ,170.6 EPS (Bt) * * Earning used is net profit (excluding one-off items) Balance Sheet Unit: Btmn FY2013 FY2014E FY2015E FY2016E Cash & Short-term investments 39, , , ,563.3 Account Receivable 2, , , ,093.0 Inventory Total Current Assets 43, , , ,763.4 Net PP&E 82, , , ,792.4 Total Non-Current Assets 109, , , ,196.3 Total Assets 153, , , ,959.7 Short-Term Borrowings 4, , , ,460.4 Account Payable 1, , , ,522.5 Total Current Liabilities 19, , , ,616.1 Long-Term Borrowings 37, , , ,980.6 Total Non-Current Liabilities 41, , , ,802.7 Total Liabilities 61, , , ,418.9 Paid-up Capital 14, , , ,285.7 Capital Surplus 12, , , ,567.7 Total Equity 91, , , ,540.8 Total Liabilities and Equity 153, , , ,959.7 Key Assumptions FY2013 FY2014E FY2015E FY2016E Passenger numbers (mn people) % change 20.4% 1.9% 20.0% 10.0% Aircraft movement (flights) 559, , , ,437 % change 16.5% 9.9% 15.0% 10.0% Additional rental from new DMK & HKT terminal (Btmn) Source: SET, AWS estimates 7

8 รายงานการประเม นการกาก บด แลก จการ (CGR) โดยสมาคมส งเสร มสถาบ นกรรมการบร ษ ทไทย 2556 Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in ADVANC BTS GRAMMY MCOT PTT SC SSI TMB AOT CIMBT HANA MINT PTTEP SCB SSSC TNITY ASIMAR CK HEMRAJ NKI PTTGC SCC SVI TOP BAFS CPF ICC NOBLE QH SCSMG SYMC TRC BANPU CPN INTUCH PAP RATCH SE-ED TCAP TRUE BAY CSL IRPC PG ROBINS SIM THAI TTW BBL DRT IVL PHOL RS SIS THCOM TVO BCP DTAC KBANK PR S&J SITHAI THRE UV BECL EASTW KKP PRANDA SAMART SNC TIP VGI BKI EGCO KTB PS SAMTEL SPALI TISCO WACOAL BROOK ERW LPN PSL SAT SPI TKT 2S ASP CHOW GBX JUBILE LRH NMG PPP SINGER TCP TOG UAC ACAP AYUD CM GC KBS LST NSI PREB SIRI TF TPC UMI AF BEC CNT GFPT KCE MACO NWR PRG SKR TFD TPCORP UMS AHC BFIT CPALL GL KGI MAJOR OCC PT SMT TFI TPIPL UP AIT BH CSC GLOW KKC MAKRO OFM PYLON SNP THANA TRT UPOIC AKP BIGC DCC GOLD KSL MBK OGC QTC SPCG THANI TRU UT AMANAH BJC DELTA GSTEL KWC MBKET OISHI RASA SPPT THIP TSC VIBHA AMARIN BLA DTC GUNKUL L&E MFC PB SABINA SSF TICON TSTE VIH AMATA BMCL ECL HMPRO LANNA MFEC PDI SAMCO STANLY TIPCO TSTH VNG AP BWG EE HTC LH MODERN PE SCCC STEC TK TTA VNT APCO CCET EIC IFEC LHBANK MTI PF SCG SUC TLUXE TTCL YUASA APCS CENTEL ESSO INET LHK NBC PJW SEAFCO SUSCO TMILL TUF ZMICO ASIA CFRESH FE ITD LIVE NCH PM SFP SYNTEC TMT TWFP ASK CGS FORTH JAS LOXLEY NINE PPM SIAM TASCO TNL TYM A ASIA CITY EASON HTECH KASET MJD PL SF SVOA TMI UOBKH AAV BAT-3K CMR EMC HYDRO KC MK POST SGP SWC TNDT UPF AEC BCH CNS EPCO IFS KCAR MOONG PRECHA SIMAT SYNEX TNPC UWC AEONTS BEAUTY CPL F&D IHL KDH MPIC PRIN SLC TBSP TOPP VARO AFC BGT CRANE FNS ILING KTC MSC Q-CON SMIT TCCC TPAC VTE AGE BLAND CSP FOCUS INOX KWH NC QLT SMK TEAM TPP WAVE AH BOL CSR FPI IRC LALIN NIPPON RCI SOLAR TGCI TR WG AI BROCK CTW FSS IRCP LEE NNCL RCL SPC TIC TTI WIN AJ BSBM DEMCO GENCO IT MATCH NTV ROJNA SPG TIES TVD WORK AKR CHARAN DNA GFM JMART MATI OSK RPC SRICHA TIW TVI ALUCON CHUO DRACO GJS JMT MBAX PAE SCBLIF SSC TKS TWZ ANAN CI EA GLOBAL JTS MDX PATO SCP STA TMC UBIS ARIP CIG EARTH HFT JUTHA PRINC PICO SENA SUPER TMD UEC Score Range Number of Logo Description Excellent Very Good Good Satisfactory Pass Below 50 No logo given N/A Corporate Governance Report disclaimer The disclosure of the survey result of the Thai Institute of Directors Association ( IOD ) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date, Asia wealth Securities Company Limited does not conform nor certify the accuracy of such survey result. 8

9 Branch Address Phone Fax Head Office 540 Floor 7,14,17, Mercury Tower, Ploenchit Road, Lumphini, Pathumwan Bangkok Silom 191 Silom Complex Building,21st Floor Room 2,3-1 Silom Rd., Silom, Bangrak, Bangkok, Thailand Asok 159 Sermmitr Tower, 17th FL. Room No.1703, Sukhumvit 21 Road, Klong Toey Nua, Wattana, Bangkok Pinklao Chaengwattana Chaengwattana 2 7/3 Central Plaza Pinklao Office Building Tower B, 16th Flr., Room No Baromrajachonnanee Road, Arunamarin, Bangkoknoi, Bangkok /99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr., Room 2204 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi /99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Flr., Room 2203 Chaengwattana Road, Bang Talad, Pakkred, Nonthaburi , Mega Bangna 39 Moo6 Megabangna, 1st Flr., Room 1632/7 Bangna-Trad Road, Bangkaew Bangplee, Samutprakarn Rayong 356/18 Sukhumvit Road, Nuen-Phra Sub District, Muang District, Rayong Province Khonkaen 26/9 Srijanmai Road, Tamboonnaimuang, Khon Khaen Chonburi 44 Vachiraprakarn Road, Bangplasoi, Muang Chonburi, Chonburi Chaseongsao /2 Moo2 1st Flr., Sukprayoon Road, Na Meung Sub- District, Meung District, Chachoengsao