Asia Aviation AWS
Asia Aviation Buy (17E TP Bt9.00)
Company Update
Close Bt6.80
Transport & Logistics October 21, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Route adjustments to still support volume growth Price Performance (%)
Target price revised up to Bt9.00; Reiterate BUY We slightly revise up AAV’s target price by 5% to Bt9.00, based on 20x PER (‐0.5SD), after an upward earnings revision owing to continued passenger volume growth amidst the negative impact on Chinese passengers from the zero‐dollar tours crackdown. BUY maintained. Strong volume growth in 3Q16E despite zero‐dollar tours crackdown AAV admits that the zero‐dollar tours crackdown will slightly impact passenger volume, as Chinese passengers accounted for around 23% of the total, especially for charter flights to Chinese destinations, which contribute around 10‐15% of total flights. As a result, the implications for the full year should be minimal at round 3% of total passengers and AAV expects the impact to only last until next Chinese New Year. AAV is addressing the issue by increasing flight frequency to other destinations, such as UTP‐HDY and BKK‐HKT. Meanwhile, although the effect became apparent in the second half of September, AAV’s passenger volume growth in 3Q16E remained strong at +21% (higher than +18% in 1H16), as the increase of passenger volume for ASEAN and CLMV destinations more than offset the impact.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.482
0.530
KT ZMICO vs. consensus Share data
‐6.6%
‐15.1%
Reuters / Bloomberg
AAV.BK/AAV TB
Paid‐up Shares (m)
4,850.00
Par (Bt)
0.10
Market cap (Bt bn / US$ m)
33.00/943.00
Foreign limit / actual (%)
0.10/0.10
52 week High / Low (Bt)
7.80/4.34
Avg. daily T/O (shares 000)
56,578.00
NVDR (%)
9.72
Estimated free float (%)
54.61
Beta
0.71
URL
www.aavplc.co.th
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Earnings to remain impressive in 3Q16E We expect AAV to deliver net profit of Bt539mn in 3Q16E, +487% YoY and +28% QoQ, including normalized profit of Bt489mn (+136% YoY, +20% QoQ) and FX gain of Bt50mn. Our projection is based on passenger volume at 4.33mn (+21% YoY, +4% QoQ), the continued decline of ticket fares (‐5% YoY, +5% QoQ) to be conservative, and the ongoing fall of global jet fuel prices to US$54/barrel (‐11% YoY, +1% QoQ). Revise up net profit estimates in 2016‐17E by 5% and 4% We again revise up AAV’s net profit estimates in 2016‐17E by 5% and 4%, respectively, owing to an upgrade of passenger volume in 2016E to 17.3mn (+17%), vs. 17.0mn (+15%) previously. Based on this assumption, we expect passenger volume growth in 4Q16E to slow (to +12%), factoring in the negative impact of Chinese passengers. Consequently, AAV’s earnings result in 4Q16E will likely be soft owing to costs related to two new A350s that it will receive in the quarter. For 2017E, we maintain our conservative passenger volume growth of +10%. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) DPS (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 25,981 183 0.04 120 0.02 (86.85) 0.00 4.03 2014 274.45 33.23 1.69 0.00 0.62 29.58
2015 30,345 1,078 0.22 1,181 0.24 882.68 0.10 4.15 2015 27.93 10.44 1.64 1.47 5.95 32.00
2016E 35,004 2,190 0.45 2,127 0.44 80.16 0.20 4.40 2016E 15.50 7.06 1.54 2.90 10.26 30.01
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 38,701 2,168 0.45 2,168 0.45 1.92 0.20 4.65 2017E 15.21 6.65 1.46 2.96 9.88 23.99
2018E 40,706 2,260 0.47 2,260 0.47 4.22 0.21 4.90 2018E 14.59 6.20 1.39 3.08 9.76 20.82
Figure 1: AAV’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45 40 35 +1.0 S.D.
30 25
Avg.
20 -0.50S.D. 15
Jul-16
Oct-16
Jan-16
Apr-16
Jul-15
Oct-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Sep-12
-1 .0S.D. May-12
10
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 30.1 26.7 23.3 19.9 16.5 13.1 9.7 6.3
Implied market price (Bt) 13.56 12.03 10.49 8.96 7.43 5.90 4.37 2.83
Upside/Downside vs. current market price (%) 95.1 73.0 51.0 28.9 6.9 (15.1) (37.2) (59.2)
Source: Bloomberg, KT ZMICO Research
Figure 2: 3Q16E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Minority interests Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
3Q15 7,431 1,077 (592) 763 (88) 24 (21) (116) (192) 92 208 0.02
2Q16 7,914 1,359 (613) 1,033 (109) 25 76 14 (330) 423 408 0.09
3Q16E 8,651 1,771 (738) 1,320 (116) 20 (47) 50 (400) 539 489 0.11
% YoY 16.4 64.4 24.7 73.1 31.6 (16.1) 118.6 n.m. 108.2 486.9 135.7 486.9
% QoQ 9.3 30.3 20.5 27.7 6.3 (19.2) (161.4) n.m. 21.5 27.7 19.9 27.7
9M16E 25,736 5,833 (2,014) 4,678 (352) 57 (61) 63 (1,555) 1,971 1,908 0.406
14.5 10.3 1.2 1.1 5.5 0.7 4.1 1.8
17.2 13.1 5.3 1.2 6.8 0.6 4.4 7.9
20.5 15.3 6.2
22.7 18.2 7.7
% YoY 15.0 52.3 20.7 56.3 3.7 (29.0) (56.8) (141.9) 92.8 145.1 99.9 145.1
2016E 35,004 7,316 (2,914) 5,581 (490) 76 (120) 63 (1,741) 2,190 2,127 0.452
YTD (% of 16E) 73.5 79.7 69.1 83.8 71.9 75.3 50.9 100.0 89.3 90.0 89.7 90.0
20.9 15.9 6.3 1.0 9.0 0.4 4.4 10.6
Source: AAV, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 3: Peer comparison COUNTRY
PER (x) 15
PBV (x)
Yield (%)
ROE (%)
EV/EBITDA (x)
16E
17E
15
16E
17E
15
16E
17E
15
16E
17E
15
16E
17E 7.0
LCC AIR ASIA BHD
Malaysia
6.6
6.6
7.3
0.8
1.4
1.2
3.1
3.1
2.8
12.0
26.1
17.2
5.1
6.7
AIRARABI
UAE
12.4
10.6
9.8
1.3
1.2
1.1
6.6
7.1
7.6
10.2
10.7
13.3
8.3
7.6
7.1
CEBU AIR INC
Philippines
11.4
6.5
7.4
2.0
1.9
1.6
1.2
2.4
2.2
18.9
31.8
23.7
5.5
5.2
5.4
EASYJET PLC
Britain
12.8
8.8
10.0
3.1
1.5
1.4
3.1
5.7
4.9
24.8
18.0
14.9
8.0
5.2
5.4
RYANAIR HOLDINGS PLC
Ireland
17.8
13.3
12.1
3.8
3.7
3.7
0.0
2.0
0.0
23.7
31.2
33.1
10.5
8.4
7.7
SOUTHWEST AIRLINES
USA
12.2
11.2
11.0
3.8
2.9
2.4
0.7
0.9
1.0
30.9
30.9
24.9
5.5
5.0
5.0 n.a.
TIGER AIRWAYS HLDG
Singapore
n.a.
n.a.
n.a.
4.0
n.a.
n.a.
0.0
n.a.
n.a.
n.m.
4.0
22.7
n.m.
n.a.
VIRGIN AUSTRALIA HLDG
Australia
n.a.
16.8
21.4
1.4
1.0
1.1
0.0
0.0
0.0 (10.4)
2.9
7.9
16.3
8.0
6.7
WESTJET AIRLINES LTD
Canada
6.9
9.0
9.2
1.3
1.3
1.2
2.8
2.5
2.6
19.7
13.9
12.5
3.0
3.8
3.6
11.4
10.3
11.0
2.4
1.9
1.7
1.9
3.0
2.6
16.2
18.8
18.9
7.8
6.2
6.0 6.7
Average (simple) Conventional CHINA SOUTHERN AIRLINES‐H China AIR CHINA LTD‐H
China
CATHAY PACIFIC AIRWAYS
Hong Kong
CHINA EASTERN AIRLINES‐H
China
KOREAN AIR LINES CO LTD
South Korea
13.2
6.0
6.2
1.3
0.9
0.8
1.6
2.6
2.9
10.0
16.4
14.1
7.2
6.7
8.9
6.3
6.5
1.1
0.9
0.8
2.1
2.7
2.9
12.4
14.2
12.7
7.0
6.4
6.4
10.5
6.1
6.8
1.3
0.9
0.8
0.0
2.1
1.9
13.5
16.7
13.5
8.3
7.5
7.4
8.8
19.1
17.3
1.1
0.8
0.8
3.9
1.9
2.5
12.0
4.6
5.4
6.2
6.9
6.5
38.1
18.3
16.0
1.1
0.9
0.9
1.8
3.9
4.6
2.9
6.1
5.8
5.3
3.6
3.7
SINGAPORE AIRLINES LTD
Singapore
n.a.
n.a.
6.2
0.8
1.1
0.9
0.0
0.0
0.1
‐24.9
‐0.6
16.1
6.8
6.1
6.1
EVA AIRWAYS CORP
Taiwan
11.0
8.6
9.7
1.5
1.1
1.0
n.a.
1.5
1.6
15.5
12.4
12.0
5.8
5.2
4.9
CHINA AIRLINES LTD
Taiwan
Average (simple)
11.3
9.5
8.8
1.1
0.8
0.8
n.a.
2.0
2.5
10.8
8.3
8.6
6.1
5.0
5.1
14.5
10.5
9.7
1.2
0.9
0.8
1.6
2.1
2.4
6.5
9.8
11.0
6.6
5.9
5.9
Source: Bloomberg
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 Gross profit SG&A expense EBITDA Depreciation & amortization EBIT Interest expense 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 (%) Gross 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)
2013 23,994 (19,928) 4,066 (1,756) 2,712 (402) 2,310 (171) 0 291 2,430 (651) (736) 1,043 0.22 0.22 914 0.19 0.00
2014 25,981 (23,708) 2,273 (1,925) 1,166 (818) 348 (313) 0 231 267 1 (85) 183 0.04 0.04 120 0.02 0.00
2015 30,345 (25,315) 5,030 (2,377) 3,775 (1,122) 2,653 (457) 0 16 2,212 (151) (982) 1,078 0.22 0.22 1,181 0.24 0.10
2016E 35,004 (27,688) 7,316 (2,914) 5,581 (1,179) 4,402 (490) 0 139 4,051 (120) (1,741) 2,190 0.45 0.45 2,127 0.44 0.20
2013 6,453 90 10,956 27,436 44,935 615 7,546 18,260 7,329 19,346 44,935
2014 6,298 97 16,033 27,073 49,502 959 11,118 22,486 7,482 19,534 49,502
2015 7,591 94 18,216 26,926 52,827 1,261 12,775 24,743 7,941 20,142 52,827
2016E 7,549 145 21,594 27,249 56,536 1,079 12,875 25,508 9,681 21,348 56,537
2013 1,043 402 2,445 131 4,020 (2,082) (3,483) (5,565) (348) 0 0 0 (348) (1,894) (1,545) (0.32)
2014 183 818 654 194 1,848 (980) 3,004 2,025 (1,043) 0 0 0 (1,043) 2,830 3,873 0.80
2015 1,078 1,122 (345) 1,152 3,007 615 268 883 (2,556) 0 0 0 (2,556) 1,334 3,890 0.80
2016E 2,190 1,179 (1,208) (63) 2,099 (1,573) 0 (1,573) (83) 0 (485) 0 (568) (43) 525 0.11
2013 46.2 64.6 13.7 16.9 11.3 9.6 4.3 3.8 26.8
2014 8.3 (57.0) (86.9) 8.7 4.5 1.3 0.7 0.5 (0.5)
2015 16.8 223.7 882.7 16.6 12.4 8.7 3.6 3.9 6.8
2016E 15.4 47.8 80.2 20.9 15.9 12.6 6.3 6.1 3.0
2013 0.30 0.09
2014 0.38 0.30
2015 0.41 0.32
2016E 0.40 0.30
2017E 38,701 (30,985) 7,716 (3,242) 5,771 (1,297) 4,474 (490) 0 81 4,064 (122) (1,774) 2,168 0.45 0.45 2,168 0.45 0.20
2017E 8,644 160 24,229 27,423 60,456 1,232 12,821 26,460 11,456 22,541 60,456
2018E 9,638 169 27,205 27,542 64,553 1,385 13,204 27,464 13,304 23,785 64,553
2017E 2,168 1,297 60 0 3,526 (1,573) 0 (1,573) 99 0 (957) 0 (858) 1,095 1,953 0.40
2018E 40,706 (32,601) 8,105 (3,459) 6,116 (1,470) 4,646 (501) 0 91 4,236 (127) (1,849) 2,260 0.47 0.47 2,260 0.47 0.21
2018E 2,260 1,470 13 0 3,743 (2,310) 0 (2,310) 536 0 (975) 0 (439) 994 1,433 0.30
2017E 10.6 3.4 1.9 19.9 14.9 11.6 5.6 5.6 3.0
2018E 5.2 6.0 4.2 19.9 15.0 11.4 5.6 5.6 3.0
2017E 0.38 0.24
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2018E 0.38 0.21
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, PACE, TPOLY, M‐CHAI, TFD, SUTHA. KT ZMICO is a co‐underwriter of RJH, BCPG, ITEL, SQ, ALLA, BPP. 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
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th
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt6.80
Transport & Logistics October 21, 2016
Earnings upgrade/Earnings downgrade/Overview unchanged
Route adjustments to still support volume growth Price Performance (%)
Target price revised up to Bt9.00; Reiterate BUY We slightly revise up AAV’s target price by 5% to Bt9.00, based on 20x PER (‐0.5SD), after an upward earnings revision owing to continued passenger volume growth amidst the negative impact on Chinese passengers from the zero‐dollar tours crackdown. BUY maintained. Strong volume growth in 3Q16E despite zero‐dollar tours crackdown AAV admits that the zero‐dollar tours crackdown will slightly impact passenger volume, as Chinese passengers accounted for around 23% of the total, especially for charter flights to Chinese destinations, which contribute around 10‐15% of total flights. As a result, the implications for the full year should be minimal at round 3% of total passengers and AAV expects the impact to only last until next Chinese New Year. AAV is addressing the issue by increasing flight frequency to other destinations, such as UTP‐HDY and BKK‐HKT. Meanwhile, although the effect became apparent in the second half of September, AAV’s passenger volume growth in 3Q16E remained strong at +21% (higher than +18% in 1H16), as the increase of passenger volume for ASEAN and CLMV destinations more than offset the impact.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.482
0.530
KT ZMICO vs. consensus Share data
‐6.6%
‐15.1%
Reuters / Bloomberg
AAV.BK/AAV TB
Paid‐up Shares (m)
4,850.00
Par (Bt)
0.10
Market cap (Bt bn / US$ m)
33.00/943.00
Foreign limit / actual (%)
0.10/0.10
52 week High / Low (Bt)
7.80/4.34
Avg. daily T/O (shares 000)
56,578.00
NVDR (%)
9.72
Estimated free float (%)
54.61
Beta
0.71
URL
www.aavplc.co.th
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
Earnings to remain impressive in 3Q16E We expect AAV to deliver net profit of Bt539mn in 3Q16E, +487% YoY and +28% QoQ, including normalized profit of Bt489mn (+136% YoY, +20% QoQ) and FX gain of Bt50mn. Our projection is based on passenger volume at 4.33mn (+21% YoY, +4% QoQ), the continued decline of ticket fares (‐5% YoY, +5% QoQ) to be conservative, and the ongoing fall of global jet fuel prices to US$54/barrel (‐11% YoY, +1% QoQ). Revise up net profit estimates in 2016‐17E by 5% and 4% We again revise up AAV’s net profit estimates in 2016‐17E by 5% and 4%, respectively, owing to an upgrade of passenger volume in 2016E to 17.3mn (+17%), vs. 17.0mn (+15%) previously. Based on this assumption, we expect passenger volume growth in 4Q16E to slow (to +12%), factoring in the negative impact of Chinese passengers. Consequently, AAV’s earnings result in 4Q16E will likely be soft owing to costs related to two new A350s that it will receive in the quarter. For 2017E, we maintain our conservative passenger volume growth of +10%. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) DPS (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 25,981 183 0.04 120 0.02 (86.85) 0.00 4.03 2014 274.45 33.23 1.69 0.00 0.62 29.58
2015 30,345 1,078 0.22 1,181 0.24 882.68 0.10 4.15 2015 27.93 10.44 1.64 1.47 5.95 32.00
2016E 35,004 2,190 0.45 2,127 0.44 80.16 0.20 4.40 2016E 15.50 7.06 1.54 2.90 10.26 30.01
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 38,701 2,168 0.45 2,168 0.45 1.92 0.20 4.65 2017E 15.21 6.65 1.46 2.96 9.88 23.99
2018E 40,706 2,260 0.47 2,260 0.47 4.22 0.21 4.90 2018E 14.59 6.20 1.39 3.08 9.76 20.82
Figure 1: AAV’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X) 45 40 35 +1.0 S.D.
30 25
Avg.
20 -0.50S.D. 15
Jul-16
Oct-16
Jan-16
Apr-16
Jul-15
Oct-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Sep-12
-1 .0S.D. May-12
10
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 30.1 26.7 23.3 19.9 16.5 13.1 9.7 6.3
Implied market price (Bt) 13.56 12.03 10.49 8.96 7.43 5.90 4.37 2.83
Upside/Downside vs. current market price (%) 95.1 73.0 51.0 28.9 6.9 (15.1) (37.2) (59.2)
Source: Bloomberg, KT ZMICO Research
Figure 2: 3Q16E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit SG&A expenses EBITDA Interest expenses Other income Income tax Forex gain (loss) Minority interests Net profit (loss) Normalized profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt/equity (x) BVPS (Bt) ROE (%)
3Q15 7,431 1,077 (592) 763 (88) 24 (21) (116) (192) 92 208 0.02
2Q16 7,914 1,359 (613) 1,033 (109) 25 76 14 (330) 423 408 0.09
3Q16E 8,651 1,771 (738) 1,320 (116) 20 (47) 50 (400) 539 489 0.11
% YoY 16.4 64.4 24.7 73.1 31.6 (16.1) 118.6 n.m. 108.2 486.9 135.7 486.9
% QoQ 9.3 30.3 20.5 27.7 6.3 (19.2) (161.4) n.m. 21.5 27.7 19.9 27.7
9M16E 25,736 5,833 (2,014) 4,678 (352) 57 (61) 63 (1,555) 1,971 1,908 0.406
14.5 10.3 1.2 1.1 5.5 0.7 4.1 1.8
17.2 13.1 5.3 1.2 6.8 0.6 4.4 7.9
20.5 15.3 6.2
22.7 18.2 7.7
% YoY 15.0 52.3 20.7 56.3 3.7 (29.0) (56.8) (141.9) 92.8 145.1 99.9 145.1
2016E 35,004 7,316 (2,914) 5,581 (490) 76 (120) 63 (1,741) 2,190 2,127 0.452
YTD (% of 16E) 73.5 79.7 69.1 83.8 71.9 75.3 50.9 100.0 89.3 90.0 89.7 90.0
20.9 15.9 6.3 1.0 9.0 0.4 4.4 10.6
Source: AAV, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 3: Peer comparison COUNTRY
PER (x) 15
PBV (x)
Yield (%)
ROE (%)
EV/EBITDA (x)
16E
17E
15
16E
17E
15
16E
17E
15
16E
17E
15
16E
17E 7.0
LCC AIR ASIA BHD
Malaysia
6.6
6.6
7.3
0.8
1.4
1.2
3.1
3.1
2.8
12.0
26.1
17.2
5.1
6.7
AIRARABI
UAE
12.4
10.6
9.8
1.3
1.2
1.1
6.6
7.1
7.6
10.2
10.7
13.3
8.3
7.6
7.1
CEBU AIR INC
Philippines
11.4
6.5
7.4
2.0
1.9
1.6
1.2
2.4
2.2
18.9
31.8
23.7
5.5
5.2
5.4
EASYJET PLC
Britain
12.8
8.8
10.0
3.1
1.5
1.4
3.1
5.7
4.9
24.8
18.0
14.9
8.0
5.2
5.4
RYANAIR HOLDINGS PLC
Ireland
17.8
13.3
12.1
3.8
3.7
3.7
0.0
2.0
0.0
23.7
31.2
33.1
10.5
8.4
7.7
SOUTHWEST AIRLINES
USA
12.2
11.2
11.0
3.8
2.9
2.4
0.7
0.9
1.0
30.9
30.9
24.9
5.5
5.0
5.0 n.a.
TIGER AIRWAYS HLDG
Singapore
n.a.
n.a.
n.a.
4.0
n.a.
n.a.
0.0
n.a.
n.a.
n.m.
4.0
22.7
n.m.
n.a.
VIRGIN AUSTRALIA HLDG
Australia
n.a.
16.8
21.4
1.4
1.0
1.1
0.0
0.0
0.0 (10.4)
2.9
7.9
16.3
8.0
6.7
WESTJET AIRLINES LTD
Canada
6.9
9.0
9.2
1.3
1.3
1.2
2.8
2.5
2.6
19.7
13.9
12.5
3.0
3.8
3.6
11.4
10.3
11.0
2.4
1.9
1.7
1.9
3.0
2.6
16.2
18.8
18.9
7.8
6.2
6.0 6.7
Average (simple) Conventional CHINA SOUTHERN AIRLINES‐H China AIR CHINA LTD‐H
China
CATHAY PACIFIC AIRWAYS
Hong Kong
CHINA EASTERN AIRLINES‐H
China
KOREAN AIR LINES CO LTD
South Korea
13.2
6.0
6.2
1.3
0.9
0.8
1.6
2.6
2.9
10.0
16.4
14.1
7.2
6.7
8.9
6.3
6.5
1.1
0.9
0.8
2.1
2.7
2.9
12.4
14.2
12.7
7.0
6.4
6.4
10.5
6.1
6.8
1.3
0.9
0.8
0.0
2.1
1.9
13.5
16.7
13.5
8.3
7.5
7.4
8.8
19.1
17.3
1.1
0.8
0.8
3.9
1.9
2.5
12.0
4.6
5.4
6.2
6.9
6.5
38.1
18.3
16.0
1.1
0.9
0.9
1.8
3.9
4.6
2.9
6.1
5.8
5.3
3.6
3.7
SINGAPORE AIRLINES LTD
Singapore
n.a.
n.a.
6.2
0.8
1.1
0.9
0.0
0.0
0.1
‐24.9
‐0.6
16.1
6.8
6.1
6.1
EVA AIRWAYS CORP
Taiwan
11.0
8.6
9.7
1.5
1.1
1.0
n.a.
1.5
1.6
15.5
12.4
12.0
5.8
5.2
4.9
CHINA AIRLINES LTD
Taiwan
Average (simple)
11.3
9.5
8.8
1.1
0.8
0.8
n.a.
2.0
2.5
10.8
8.3
8.6
6.1
5.0
5.1
14.5
10.5
9.7
1.2
0.9
0.8
1.6
2.1
2.4
6.5
9.8
11.0
6.6
5.9
5.9
Source: Bloomberg
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 Gross profit SG&A expense EBITDA Depreciation & amortization EBIT Interest expense 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 (%) Gross 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)
2013 23,994 (19,928) 4,066 (1,756) 2,712 (402) 2,310 (171) 0 291 2,430 (651) (736) 1,043 0.22 0.22 914 0.19 0.00
2014 25,981 (23,708) 2,273 (1,925) 1,166 (818) 348 (313) 0 231 267 1 (85) 183 0.04 0.04 120 0.02 0.00
2015 30,345 (25,315) 5,030 (2,377) 3,775 (1,122) 2,653 (457) 0 16 2,212 (151) (982) 1,078 0.22 0.22 1,181 0.24 0.10
2016E 35,004 (27,688) 7,316 (2,914) 5,581 (1,179) 4,402 (490) 0 139 4,051 (120) (1,741) 2,190 0.45 0.45 2,127 0.44 0.20
2013 6,453 90 10,956 27,436 44,935 615 7,546 18,260 7,329 19,346 44,935
2014 6,298 97 16,033 27,073 49,502 959 11,118 22,486 7,482 19,534 49,502
2015 7,591 94 18,216 26,926 52,827 1,261 12,775 24,743 7,941 20,142 52,827
2016E 7,549 145 21,594 27,249 56,536 1,079 12,875 25,508 9,681 21,348 56,537
2013 1,043 402 2,445 131 4,020 (2,082) (3,483) (5,565) (348) 0 0 0 (348) (1,894) (1,545) (0.32)
2014 183 818 654 194 1,848 (980) 3,004 2,025 (1,043) 0 0 0 (1,043) 2,830 3,873 0.80
2015 1,078 1,122 (345) 1,152 3,007 615 268 883 (2,556) 0 0 0 (2,556) 1,334 3,890 0.80
2016E 2,190 1,179 (1,208) (63) 2,099 (1,573) 0 (1,573) (83) 0 (485) 0 (568) (43) 525 0.11
2013 46.2 64.6 13.7 16.9 11.3 9.6 4.3 3.8 26.8
2014 8.3 (57.0) (86.9) 8.7 4.5 1.3 0.7 0.5 (0.5)
2015 16.8 223.7 882.7 16.6 12.4 8.7 3.6 3.9 6.8
2016E 15.4 47.8 80.2 20.9 15.9 12.6 6.3 6.1 3.0
2013 0.30 0.09
2014 0.38 0.30
2015 0.41 0.32
2016E 0.40 0.30
2017E 38,701 (30,985) 7,716 (3,242) 5,771 (1,297) 4,474 (490) 0 81 4,064 (122) (1,774) 2,168 0.45 0.45 2,168 0.45 0.20
2017E 8,644 160 24,229 27,423 60,456 1,232 12,821 26,460 11,456 22,541 60,456
2018E 9,638 169 27,205 27,542 64,553 1,385 13,204 27,464 13,304 23,785 64,553
2017E 2,168 1,297 60 0 3,526 (1,573) 0 (1,573) 99 0 (957) 0 (858) 1,095 1,953 0.40
2018E 40,706 (32,601) 8,105 (3,459) 6,116 (1,470) 4,646 (501) 0 91 4,236 (127) (1,849) 2,260 0.47 0.47 2,260 0.47 0.21
2018E 2,260 1,470 13 0 3,743 (2,310) 0 (2,310) 536 0 (975) 0 (439) 994 1,433 0.30
2017E 10.6 3.4 1.9 19.9 14.9 11.6 5.6 5.6 3.0
2018E 5.2 6.0 4.2 19.9 15.0 11.4 5.6 5.6 3.0
2017E 0.38 0.24
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2018E 0.38 0.21
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, PACE, TPOLY, M‐CHAI, TFD, SUTHA. KT ZMICO is a co‐underwriter of RJH, BCPG, ITEL, SQ, ALLA, BPP. 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
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
