Airports of Thailand Underperform (FY17E TP Bt43.50)
Airports of Thailand Underperform (FY17E TP Bt43.50)
Company Update
Close Bt39.00
Transport & Logistics March 21, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
Additional rental cost may less than market expected Price Performance (%)
Expect net profit of Bt6bn in 2QFY17E (Jan‐Mar 17) Based on preliminary figures, we estimate that AOT will deliver passenger volume of 35.05mn in 2QFY17 (Jan‐Mar 17), growing by 8% YoY, driven mainly by domestic (+13% YoY). Meanwhile, international passenger volume will likely grow by 5% YoY in 2QFY17, accelerating from +2.2% YoY in 1QFY17 (with a negative impact from the illegal tour crackdown from Chinese destinations). As a result, we estimate AOT to report net profit of Bt6bn in 2QFY17E, +9% YoY and +19% QoQ. For 1HFY17E, we estimate net profit of Bt11.1bn for AOT, 49% of our full‐year projection. For 5MFY17 (Oct‐16 to Feb‐17), AOT delivered passenger volume of 54mn, growing by 7% YoY. We thus maintain our passenger volume growth assumption of +7% YoY for the whole year for AOT.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.503
1.690
KT ZMICO vs. consensus Share data
5.8%
4.1%
Reuters / Bloomberg
AOT.BK/AOT TB
Paid‐up Shares (m)
14,285.70
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
557.00/16,043.00
Foreign limit / actual (%)
30.00/12.64
52 week High / Low (Bt)
42.50/30.00
Avg. daily T/O (shares 000) NVDR (%)
8,528.00 3.76
Estimated free float (%)
29.99
Beta
1.53
URL
www.airportthai.co.th
CGR
Anti‐corruption
Level 2 (Declared)
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Maintain “Underperform” According to the news, which was confirmed by AOT, the additional rental cost paid to the Treasury Dept. will not be that significant as both have agreed to impose an ROA rental adjustment on only non‐ aeronautical areas at SBIA, not total areas as earlier expected. However, we view that this news will still pressure AOT’s share price in the short term. We thus maintain our “Underperform” rating with the DCF‐based TP of Bt43.50 for AOT. Every Bt1bn rental cost increase will lower our FY17E net profit projection and TP for AOT by 3% and 1%, respectively.
Retroactive rental costs of regional airports likely to be realized in R/E Our 2QFY17E earnings preview for AOT as mentioned above does not include potential retroactive rental costs paid to the Treasury Dept. of around Bt1.2bn from regional airports (since FY07). Based on the news, only CNX and HKT airports that already have operating profit will adjust revenue shared to the Treasury Dept. to 5%, vs. 2% currently, the same rate as DMK, starting from FY07 (start of operations of both airports). According to the news, the Treasury Dept. is demanding that AOT pay the retroactive expenses by Mar‐17. AOT expects the costs to be realized in the retained earnings item at book value, not in the P/L statements. Still in negotiations with Treasury Dept. regarding new rental cost Regarding SBIA, AOT and the Treasury Dept. are still negotiating an additional rental rate (based on ROA) which will be imposed only on non‐ aeronautical areas. As a result, the cost will be much lower than the figure of Bt5.5bn per year calculated from total areas. Financials and Valuation FY Ended 30 Sep Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 30 Sep Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
FY15 43,969 18,729 1.31 15,755 1.10 30.97 0.65 7.60 FY15 29.75 20.30 5.13 1.68 15.32 cash
FY16 50,962 19,571 1.37 19,371 1.36 22.95 0.68 8.49 FY16 28.47 17.23 4.59 1.75 16.85 cash
FY17E 56,053 22,761 1.59 22,761 1.59 17.50 0.79 9.29 FY17E 24.48 15.25 4.20 2.04 17.92 cash
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
FY18E 60,549 25,158 1.76 25,158 1.76 10.53 0.88 10.17 FY18E 22.15 14.30 3.83 2.25 18.09 cash
FY19E 65,908 27,789 1.95 27,789 1.95 10.46 0.97 11.15 FY19E 20.05 13.29 3.50 2.49 18.24 cash
Figure 1: Summary of assumptions for DCF‐based valuation for AOT 5.00 14.50 9.50 12.70 30.00 3.00 10.00
Risk‐free rate (Rf) % Market return (Rm)% Market risk premium (Rm‐Rf) % Cost of equity (Ke) % Debt‐to‐capital ratio (%) Perpetual growth rate (%) WACC (%)
Present value of free cash flow (FY17‐29E) Present value of terminal value Total present value of FCF Less: net debt (cash) as of end‐FY17E Total equity value Outstanding shares at end‐FY17E Equity value / share (Bt)
(Btmn) 251,546 338,320 589,866 (31,553) 621,419 14,290 43.50
Source: KT ZMICO Research
Figure 2: AOT’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 60 50
+1.0 S.D.
30
+0.5 S.D.
Jan-17
May-16
Sep-15
Feb-15
Jun-14
Oct-13
Mar-13
Jul-12
May-09
Apr-11
-1.0 S.D.
0
Aug-10
10
Avg.
Jan-10
-0.5 S.D.
Oct-08
20
Dec-11
40
FY17E +1.5SD +1.0SD +0.5SD average ‐0.5SD ‐1.0SD
PER (x) 37.0 32.3 27.7 23.0 18.4 13.7
Implied market price (Bt) 59 51 44 37 29 22
Upside/Downside vs. current market price (%) 51.12 32.13 13.13 (5.86) (24.86) (43.85)
Source: Bloomberg, KT ZMICO Research
Figure 3: Passenger volume growth trend (%YoY) for AOT’s airports Jul‐16 Aug‐16 Sep‐16 Oct‐16 Nov‐16 Dec‐16 Jan‐17 Feb‐17 1‐18 Mar 17*
Total 6 airports International Domestic 12.9 15.2 9.0 9.4 16.8 13.0 4.3 8.3 (1.6) 9.1 3.8 15.7 7.1 15.5 2.5 7.5 6.4 14.8
Total 13.9 9.2 15.1 6.1 3.1 8.9 10.7 4.6 9.9
International 7.0 1.6 11.8 2.7 (3.7) 2.6 5.5 1.3 4.4
SBIA Domestic
Total
13.9 8.2 13.7 13.5 14.5 18.5 22.9 12.6 16.9
8.1 2.7 12.1 4.6 (0.6) 5.3 8.6 3.3 6.5
International 36.5 36.9 34.8 9.3 1.9 3.3 10.9 6.8 9.9
DMK Domestic
Total
12.9 8.3 9.8 3.4 4.3 12.7 9.3 3.3 13.5
20.2 17.2 17.1 5.1 3.6 9.5 9.8 4.5 12.2
Source: AOT, * Preliminary figures
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: 2QFY17E earnings preview Profit / Loss Year‐end 30 Sep Revenue Operating expenses Operating profit EBITDA Interest expenses Other income Income tax Forex gain (loss) Other extra items Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Operating margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
2QFY16 13,800 (6,812) 6,988 8,600 (349) 327 (1,353) (33) ‐ 5,567 5,600 0.39
1QFY17 12,613 (6,449) 6,163 7,593 (319) 327 (1,319) 246 ‐ 5,084 4,839 0.36
2QFY17E 14,634 (7,112) 7,523 8,953 (293) 330 (1,486) (7) ‐ 6,057 6,064 0.42
% YoY 6.0 4.4 7.6 4.1 (16.0) 0.9 9.9 (78.4) ‐ 8.8 8.3 8.8
% QoQ 16.0 10.3 22.1 17.9 (8.2) 0.8 12.7 (102.9) ‐ 19.1 25.3 19.1
1HFY17E 27,247 (13,561) 13,686 16,545 (612) 657 (2,805) 238 ‐ 11,141 10,902 0.78
% YoY 6.4 6.3 6.5 3.1 (13.7) (1.6) 8.6 n.m. ‐ 9.3 6.8 9.3
FY17E 56,053 (27,785) 28,268 34,457 (1,232) 1,481 (5,719) ‐ ‐ 22,761 22,761 1.59
YTD (% of 17E) 48.6 48.8 48.4 48.0 49.7 44.4 49.0 ‐ ‐ 48.9 47.9 48.9
50.6 62.3 40.3 3.5 20.0 0.3 7.8 20.0
48.9 60.2 40.3 4.2 19.3 0.2 8.8 15.7
51.4 61.2 41.4
50.2 60.7 40.9
50.4 61.5 40.6 3.7 22.9 0.2 9.3 17.9
Source: AOT, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Operating profit SG&A EBITDA Depreciation & amortization EBIT Interest expenses Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) Core EPS growth (%) Operating margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x)
FY14 37,585 (22,493) 15,093 0 20,743 (5,650) 15,093 (1,836) 0 2,012 15,269 (3,007) (42) 12,220 8.55 8.55 12,029 8.42 3.40
FY15 43,969 (23,539) 20,430 0 26,618 (6,188) 20,430 (1,605) 0 4,511 23,335 (4,585) (21) 18,729 13.11 13.11 15,755 11.03 6.54
FY16 50,962 (26,718) 24,244 0 30,648 (6,404) 24,244 (1,377) 0 1,557 24,424 (4,821) (32) 19,571 13.70 13.70 19,371 13.56 6.83
FY17E 56,053 (27,785) 28,268 0 34,457 (6,189) 28,268 (1,232) 0 1,481 28,516 (5,719) (37) 22,761 15.93 15.93 22,761 15.93 7.94
FY14 43,203 195 94,282 16,109 153,789 3,971 30,638 56,541 203 97,044 153,789
FY15 48,490 238 95,253 15,643 159,624 4,228 27,493 50,812 225 108,588 159,624
FY16 60,490 261 91,692 19,773 172,216 4,797 26,659 50,638 257 121,322 172,216
FY17E 58,248 263 99,749 19,635 177,895 3,850 22,839 44,940 220 132,736 177,895
FY14 12,220 5,650 1,033 38 18,941 (9,559) 3,627 (5,932) (6,008) 0 (6,571) 0 (12,578) 431 13,010 9.11
FY15 18,729 6,188 186 (197) 24,906 (6,835) (9,244) (16,079) (5,734) 0 (7,057) 0 (12,790) (3,963) 8,827 6.18
FY16 19,571 6,404 3,908 441 30,325 (3,038) (11,684) (14,722) (5,661) 0 (7,142) 0 (12,803) 2,799 15,603 10.92
FY17E 22,761 6,189 (796) 0 28,154 (15,972) 0 (15,972) (4,767) 0 (9,657) 0 (14,424) (2,242) 12,182 8.53
FY14 2.1 4.6 21.1 40.2 55.2 32.5 32.0 19.7 2.1
FY15 17.0 28.3 31.0 46.5 60.5 42.6 35.8 19.6 17.0
FY16 15.9 15.1 23.0 47.6 60.1 38.4 38.0 19.7 15.9
FY17E 10.0 12.4 17.5 50.4 61.5 40.6 40.6 20.1 10.0
FY14 0.26 cash
FY15 0.23 cash
FY16 0.21 cash
FY17E 0.17 cash
FY18E 60,549 (29,279) 31,270 0 37,429 (6,159) 31,270 (1,092) 0 1,344 31,522 (6,322) (43) 25,158 17.61 17.61 25,158 17.61 8.78
FY19E 65,908 (31,246) 34,662 0 40,935 (6,273) 34,662 (956) 0 1,113 34,819 (6,983) (47) 27,789 19.45 19.45 27,789 19.45 9.70
FY18E 44,510 283 122,185 19,649 186,627 3,739 19,019 41,099 177 145,351 186,628
FY19E 32,332 308 144,466 19,874 196,980 3,702 15,310 37,563 130 159,286 196,980
FY18E 25,158 6,159 57 0 31,374 (29,833) 0 (29,833) (3,931) 0 (11,347) 0 (15,279) (13,738) 1,541 1.08
FY19E 27,789 6,273 (39) 0 34,022 (29,912) 0 (29,912) (3,746) 0 (12,542) 0 (16,288) (12,178) 4,110 2.88
FY18E 8.0 8.6 10.5 51.6 61.8 41.6 41.6 20.1 8.0
FY19E 8.9 9.4 10.5 52.6 62.1 42.2 42.2 20.1 8.9
FY18E 0.14 cash
FY19E 0.11 cash
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note:
KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG.
A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)
Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt39.00
Transport & Logistics March 21, 2017
Earnings upgrade/Earnings downgrade/Overview unchanged
Additional rental cost may less than market expected Price Performance (%)
Expect net profit of Bt6bn in 2QFY17E (Jan‐Mar 17) Based on preliminary figures, we estimate that AOT will deliver passenger volume of 35.05mn in 2QFY17 (Jan‐Mar 17), growing by 8% YoY, driven mainly by domestic (+13% YoY). Meanwhile, international passenger volume will likely grow by 5% YoY in 2QFY17, accelerating from +2.2% YoY in 1QFY17 (with a negative impact from the illegal tour crackdown from Chinese destinations). As a result, we estimate AOT to report net profit of Bt6bn in 2QFY17E, +9% YoY and +19% QoQ. For 1HFY17E, we estimate net profit of Bt11.1bn for AOT, 49% of our full‐year projection. For 5MFY17 (Oct‐16 to Feb‐17), AOT delivered passenger volume of 54mn, growing by 7% YoY. We thus maintain our passenger volume growth assumption of +7% YoY for the whole year for AOT.
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.503
1.690
KT ZMICO vs. consensus Share data
5.8%
4.1%
Reuters / Bloomberg
AOT.BK/AOT TB
Paid‐up Shares (m)
14,285.70
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
557.00/16,043.00
Foreign limit / actual (%)
30.00/12.64
52 week High / Low (Bt)
42.50/30.00
Avg. daily T/O (shares 000) NVDR (%)
8,528.00 3.76
Estimated free float (%)
29.99
Beta
1.53
URL
www.airportthai.co.th
CGR
Anti‐corruption
Level 2 (Declared)
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Maintain “Underperform” According to the news, which was confirmed by AOT, the additional rental cost paid to the Treasury Dept. will not be that significant as both have agreed to impose an ROA rental adjustment on only non‐ aeronautical areas at SBIA, not total areas as earlier expected. However, we view that this news will still pressure AOT’s share price in the short term. We thus maintain our “Underperform” rating with the DCF‐based TP of Bt43.50 for AOT. Every Bt1bn rental cost increase will lower our FY17E net profit projection and TP for AOT by 3% and 1%, respectively.
Retroactive rental costs of regional airports likely to be realized in R/E Our 2QFY17E earnings preview for AOT as mentioned above does not include potential retroactive rental costs paid to the Treasury Dept. of around Bt1.2bn from regional airports (since FY07). Based on the news, only CNX and HKT airports that already have operating profit will adjust revenue shared to the Treasury Dept. to 5%, vs. 2% currently, the same rate as DMK, starting from FY07 (start of operations of both airports). According to the news, the Treasury Dept. is demanding that AOT pay the retroactive expenses by Mar‐17. AOT expects the costs to be realized in the retained earnings item at book value, not in the P/L statements. Still in negotiations with Treasury Dept. regarding new rental cost Regarding SBIA, AOT and the Treasury Dept. are still negotiating an additional rental rate (based on ROA) which will be imposed only on non‐ aeronautical areas. As a result, the cost will be much lower than the figure of Bt5.5bn per year calculated from total areas. Financials and Valuation FY Ended 30 Sep Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 30 Sep Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
FY15 43,969 18,729 1.31 15,755 1.10 30.97 0.65 7.60 FY15 29.75 20.30 5.13 1.68 15.32 cash
FY16 50,962 19,571 1.37 19,371 1.36 22.95 0.68 8.49 FY16 28.47 17.23 4.59 1.75 16.85 cash
FY17E 56,053 22,761 1.59 22,761 1.59 17.50 0.79 9.29 FY17E 24.48 15.25 4.20 2.04 17.92 cash
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
FY18E 60,549 25,158 1.76 25,158 1.76 10.53 0.88 10.17 FY18E 22.15 14.30 3.83 2.25 18.09 cash
FY19E 65,908 27,789 1.95 27,789 1.95 10.46 0.97 11.15 FY19E 20.05 13.29 3.50 2.49 18.24 cash
Figure 1: Summary of assumptions for DCF‐based valuation for AOT 5.00 14.50 9.50 12.70 30.00 3.00 10.00
Risk‐free rate (Rf) % Market return (Rm)% Market risk premium (Rm‐Rf) % Cost of equity (Ke) % Debt‐to‐capital ratio (%) Perpetual growth rate (%) WACC (%)
Present value of free cash flow (FY17‐29E) Present value of terminal value Total present value of FCF Less: net debt (cash) as of end‐FY17E Total equity value Outstanding shares at end‐FY17E Equity value / share (Bt)
(Btmn) 251,546 338,320 589,866 (31,553) 621,419 14,290 43.50
Source: KT ZMICO Research
Figure 2: AOT’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 60 50
+1.0 S.D.
30
+0.5 S.D.
Jan-17
May-16
Sep-15
Feb-15
Jun-14
Oct-13
Mar-13
Jul-12
May-09
Apr-11
-1.0 S.D.
0
Aug-10
10
Avg.
Jan-10
-0.5 S.D.
Oct-08
20
Dec-11
40
FY17E +1.5SD +1.0SD +0.5SD average ‐0.5SD ‐1.0SD
PER (x) 37.0 32.3 27.7 23.0 18.4 13.7
Implied market price (Bt) 59 51 44 37 29 22
Upside/Downside vs. current market price (%) 51.12 32.13 13.13 (5.86) (24.86) (43.85)
Source: Bloomberg, KT ZMICO Research
Figure 3: Passenger volume growth trend (%YoY) for AOT’s airports Jul‐16 Aug‐16 Sep‐16 Oct‐16 Nov‐16 Dec‐16 Jan‐17 Feb‐17 1‐18 Mar 17*
Total 6 airports International Domestic 12.9 15.2 9.0 9.4 16.8 13.0 4.3 8.3 (1.6) 9.1 3.8 15.7 7.1 15.5 2.5 7.5 6.4 14.8
Total 13.9 9.2 15.1 6.1 3.1 8.9 10.7 4.6 9.9
International 7.0 1.6 11.8 2.7 (3.7) 2.6 5.5 1.3 4.4
SBIA Domestic
Total
13.9 8.2 13.7 13.5 14.5 18.5 22.9 12.6 16.9
8.1 2.7 12.1 4.6 (0.6) 5.3 8.6 3.3 6.5
International 36.5 36.9 34.8 9.3 1.9 3.3 10.9 6.8 9.9
DMK Domestic
Total
12.9 8.3 9.8 3.4 4.3 12.7 9.3 3.3 13.5
20.2 17.2 17.1 5.1 3.6 9.5 9.8 4.5 12.2
Source: AOT, * Preliminary figures
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: 2QFY17E earnings preview Profit / Loss Year‐end 30 Sep Revenue Operating expenses Operating profit EBITDA Interest expenses Other income Income tax Forex gain (loss) Other extra items Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Operating margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
2QFY16 13,800 (6,812) 6,988 8,600 (349) 327 (1,353) (33) ‐ 5,567 5,600 0.39
1QFY17 12,613 (6,449) 6,163 7,593 (319) 327 (1,319) 246 ‐ 5,084 4,839 0.36
2QFY17E 14,634 (7,112) 7,523 8,953 (293) 330 (1,486) (7) ‐ 6,057 6,064 0.42
% YoY 6.0 4.4 7.6 4.1 (16.0) 0.9 9.9 (78.4) ‐ 8.8 8.3 8.8
% QoQ 16.0 10.3 22.1 17.9 (8.2) 0.8 12.7 (102.9) ‐ 19.1 25.3 19.1
1HFY17E 27,247 (13,561) 13,686 16,545 (612) 657 (2,805) 238 ‐ 11,141 10,902 0.78
% YoY 6.4 6.3 6.5 3.1 (13.7) (1.6) 8.6 n.m. ‐ 9.3 6.8 9.3
FY17E 56,053 (27,785) 28,268 34,457 (1,232) 1,481 (5,719) ‐ ‐ 22,761 22,761 1.59
YTD (% of 17E) 48.6 48.8 48.4 48.0 49.7 44.4 49.0 ‐ ‐ 48.9 47.9 48.9
50.6 62.3 40.3 3.5 20.0 0.3 7.8 20.0
48.9 60.2 40.3 4.2 19.3 0.2 8.8 15.7
51.4 61.2 41.4
50.2 60.7 40.9
50.4 61.5 40.6 3.7 22.9 0.2 9.3 17.9
Source: AOT, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Operating profit SG&A EBITDA Depreciation & amortization EBIT Interest expenses Equity earnings Other income / exp. EBT Corporate tax Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity CASH FLOW (Btm) Net income Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) Core EPS growth (%) Operating margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%) FINANCIAL QUALITY Total debt to capital employed (x) Net debt to equity (x)
FY14 37,585 (22,493) 15,093 0 20,743 (5,650) 15,093 (1,836) 0 2,012 15,269 (3,007) (42) 12,220 8.55 8.55 12,029 8.42 3.40
FY15 43,969 (23,539) 20,430 0 26,618 (6,188) 20,430 (1,605) 0 4,511 23,335 (4,585) (21) 18,729 13.11 13.11 15,755 11.03 6.54
FY16 50,962 (26,718) 24,244 0 30,648 (6,404) 24,244 (1,377) 0 1,557 24,424 (4,821) (32) 19,571 13.70 13.70 19,371 13.56 6.83
FY17E 56,053 (27,785) 28,268 0 34,457 (6,189) 28,268 (1,232) 0 1,481 28,516 (5,719) (37) 22,761 15.93 15.93 22,761 15.93 7.94
FY14 43,203 195 94,282 16,109 153,789 3,971 30,638 56,541 203 97,044 153,789
FY15 48,490 238 95,253 15,643 159,624 4,228 27,493 50,812 225 108,588 159,624
FY16 60,490 261 91,692 19,773 172,216 4,797 26,659 50,638 257 121,322 172,216
FY17E 58,248 263 99,749 19,635 177,895 3,850 22,839 44,940 220 132,736 177,895
FY14 12,220 5,650 1,033 38 18,941 (9,559) 3,627 (5,932) (6,008) 0 (6,571) 0 (12,578) 431 13,010 9.11
FY15 18,729 6,188 186 (197) 24,906 (6,835) (9,244) (16,079) (5,734) 0 (7,057) 0 (12,790) (3,963) 8,827 6.18
FY16 19,571 6,404 3,908 441 30,325 (3,038) (11,684) (14,722) (5,661) 0 (7,142) 0 (12,803) 2,799 15,603 10.92
FY17E 22,761 6,189 (796) 0 28,154 (15,972) 0 (15,972) (4,767) 0 (9,657) 0 (14,424) (2,242) 12,182 8.53
FY14 2.1 4.6 21.1 40.2 55.2 32.5 32.0 19.7 2.1
FY15 17.0 28.3 31.0 46.5 60.5 42.6 35.8 19.6 17.0
FY16 15.9 15.1 23.0 47.6 60.1 38.4 38.0 19.7 15.9
FY17E 10.0 12.4 17.5 50.4 61.5 40.6 40.6 20.1 10.0
FY14 0.26 cash
FY15 0.23 cash
FY16 0.21 cash
FY17E 0.17 cash
FY18E 60,549 (29,279) 31,270 0 37,429 (6,159) 31,270 (1,092) 0 1,344 31,522 (6,322) (43) 25,158 17.61 17.61 25,158 17.61 8.78
FY19E 65,908 (31,246) 34,662 0 40,935 (6,273) 34,662 (956) 0 1,113 34,819 (6,983) (47) 27,789 19.45 19.45 27,789 19.45 9.70
FY18E 44,510 283 122,185 19,649 186,627 3,739 19,019 41,099 177 145,351 186,628
FY19E 32,332 308 144,466 19,874 196,980 3,702 15,310 37,563 130 159,286 196,980
FY18E 25,158 6,159 57 0 31,374 (29,833) 0 (29,833) (3,931) 0 (11,347) 0 (15,279) (13,738) 1,541 1.08
FY19E 27,789 6,273 (39) 0 34,022 (29,912) 0 (29,912) (3,746) 0 (12,542) 0 (16,288) (12,178) 4,110 2.88
FY18E 8.0 8.6 10.5 51.6 61.8 41.6 41.6 20.1 8.0
FY19E 8.9 9.4 10.5 52.6 62.1 42.2 42.2 20.1 8.9
FY18E 0.14 cash
FY19E 0.11 cash
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note:
KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG.
A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD)
Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
