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Company Overview
Airports of Thailand Public Company Limited is a Thailand-based company engaged in airport business and other services related to airport operation. The Company is primarily engaged in airport management business, hotel business, ground aviation services, security business and project on perishable goods business. The Company operates six international airports, such as Suvarnabhumi Airport (BKK), Don Mueang Airport (DMK), and four regional international airports, such as Chiang Mai (CNX), Hat Yai (HDY), Phuket (HKT) and Mae Fah Luang - Chiang Rai (CEI). The Company’s operations involve both aeronautical and non-aeronautical activities. Its aeronautical activities are related to air traffic, such as landing and parking charges, departure passenger service charges and aircraft service charges. Its non-aeronautical activities include office and state property rents, service revenues and concession revenues. Its subsidiaries include Suvarnabhumi Airport Hotel Company Limited.
Investment Overview
Prime beneficiary of Thailand’s tourism recovery. We believe AOT is well positioned as a prime beneficiary of the rising international travel demand, with its revenue directly linked to the number of passengers and aircrafts at its airports. In the long term, AOT has several projects in progress – such as (i) the airport city project and (ii) airport expansion plan – unlocking capacity constraints to support growth in foreign tourist arrivals.
Visa exemption to help boost tourist arrivals. The Thai Government has so far approved temporary visa waivers for tourists from 93 countries. Most importantly, the Chinese and Thai governments have agreed to permanently remove visa requirements for citizens travelling between their two nations. These developments are positive for AOT as a gateway into Thailand.
Strong earnings growth outlook. We now expect AOT’s passenger volume to increase from 100mn in FY23 to 123mn in FY24 and 131mn in FY25 (vs. 142mn in FY19). Based on such assumptions, AOT’s bottom line should jump 125% to THB19.6bn in FY24 and 19% in FY25 before rising by a further 20% to exceed the pre-COVID level in FY26. Growth should be supported by the tourist arrivals recovery and the end of assistance measures to airline operators and concessionaires.
Reiterate BUY with a DCF-based TP of THB73.00. We like the stock for its (i) deemed monopolistic status, (ii) robust earnings growth outlook, (iii) strong cash flow-generating capacity post-COVID-19, and (iv) solid balance sheet in a net cash position. The stock now offers a 30% upside to our DCF-based TP of THB73.
Risks
Slowdown in tourism sector. AOT's earnings are driven by flight and passenger traffic volume in Thailand. An economic slowdown, natural disasters and political uncertainty could dampen air traffic and are the main threats to its operations.
A slowdown in Thailand’s tourism industry recovery, slower-than-expected Chinese tourist arrivals, and regulatory risks.
Topic
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- Member of Central Deposit Insurance Corporation (CDIC)