Bangkok Airways AWS
Bangkok Airways Buy (17E TP Bt32.00)
Company Update
Close Bt25.25 Earnings upgrade/Earnings downgrade/Overview unchanged
Transport & Logistics
August 31, 2016
Better performance ahead Price Performance (%)
Reiterate BUY BA’s earnings in 2H16E are likely to continue growing upon entering the high season. We maintain our BUY call with the 2017E SOTP‐based TP of Bt32, implying PER of 25x, close to historical average PER of 26x for BA. Bright prospects for 3Q16E BA revealed 1.09mn advance ticket bookings currently, +16% YoY, of which 73% are scheduled to travel in Aug‐Dec 16 (41% to Samui and 18% to Indochina destinations). For July only, the cabin factor was expected to have stood at 73%, vs. 70% in Jul‐15. Meanwhile, the cabin factor between 1‐15 Aug was likely 80%, vs. 76% in Aug‐15. As such, we expect the 3Q16E earnings for BA to continue growing YoY. (BA reported net profit of only Bt579mn in 3Q15, including Bt178mn FX gain).
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.296
1.500
KT ZMICO vs. consensus Share data
‐19%
‐13.3%
Reuters / Bloomberg
BA.BK/BA TB
Paid‐up Shares (m)
2,100.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
53.00/1,534.00
Foreign limit / actual (%)
49.00/2.61
52 week High / Low (Bt)
27.50/19.50
Avg. daily T/O (shares 000) NVDR (%)
6,634.00 1.70
Estimated free float (%)
32.53
Beta
0.54
URL
www.bangkokair.com
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
More focus on Chinese destinations in 2H16 In 1H16, 47% of BA’s passenger revenue (Bt10.5bn, +11% YoY, 83% of total revenue) came from the Samui Island route, 25% from domestic destinations and 22% from Indochina destinations. The source of growth came mainly from the Samui route (+18% YoY) and Indochina (+14% YoY). BA will focus more on Chinese destinations in 2H16 by increasing frequency (Samui – Chengdu and Samui – Chongging) and introducing a new route (Samui – Guangzhou in Nov‐16). BA has a target to double the contribution of Chinese passengers in the future, vs. 4% of the total currently. BA also targets to add three codeshare partners in 2H16E, two from Chinese carriers. High potential for BKK‐Danang, Vietnam route in longer term In May‐16, BA introduced a new route to Danang (Vietnam). The cabin factor looked strong at 74% in May and it rose to 85% in July despite Vietnam airlines becoming a competitor in June. The new terminal at Danang International Airport is under construction and is expected to be finished in Mar‐17. BA targets to increase flight frequency to daily in Sep‐ 16, vs. four flights/week currently. In 2015, the airport served 6.72mn passengers, +35% YoY. 53%/58% of fuel usage for the next four quarters is hedged We believe the fluctuation of jet fuel prices is less likely to hurt BA’s performance as 53%/58% of the company’s fuel usage for 2H16/1H17 is currently hedged (average cost of around US$50‐57/barrel), vs. 75%/46% for AAV and 60%/40% for THAI. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 21,033 351 0.17 348 0.17 (70.53) 0.20 12.05 2014 152.49 2.10 13.70 0.79 2.15 cash
2015 23,113 1,797 0.86 1,474 0.70 323.89 0.70 14.74 2015 35.98 1.71 10.53 2.77 5.24 3.32
2016E 25,644 2,215 1.05 2,556 1.22 73.43 1.00 14.93 2016E 20.74 1.69 8.67 3.94 8.20 10.29
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 28,330 2,731 1.30 2,731 1.30 6.83 1.06 15.17 2017E 19.42 1.66 8.24 4.21 8.64 11.45
2018E 29,874 2,965 1.41 2,965 1.41 8.57 1.15 15.43 2018E 17.89 1.64 7.62 4.57 9.23 10.75
Figure 1: Summary of sum‐of‐the‐parts (SOTP) valuation Company BA’s core business SPF BDMS
BA’s stake (%) 30.43 7.83
Valuation Method PER of 15x (average PER of regional airports & airline sector) DCF KT ZMICO research target price of Bt26
Total SOTP‐based valuation
Value to BA (Bt) 13.26 3.76 15.02
32.04
Source: KT ZMICO Research Figure 2: BA’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
40.0 35.0
+1.0 S.D.
30.0
+0.5.0 S.D. Avg.
25.0
-0.5.S.D. -1.0 S.D.
20.0
Jul-16
Aug-16
Jun-16
Apr-16
May-16
Mar-16
Jan-16
Feb-16
Dec-15
Oct-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
10.0
Nov-15
15.0
Sep-15
-2.0 S.D.
PER (x) 31.0 28.5 26.0 23.5 21.0 18.5 16.0 13.5
Implied market price (Bt) 40.30 37.05 33.80 30.55 27.30 24.05 20.80 17.55
Upside/Downside vs. current market price (%) 59.6 46.7 33.9 21.0 8.1 (4.8) (17.6) (30.5)
Source: Bloomberg, KT ZMICO Research
Figure 3: Peer comparison COUNTRY
PER (x) 15
16E
PBV (x)
Yield (%)
ROE (%)
EV/EBITDA (x)
17E
15
16E
17E
15
16E
17E
15
16E
17E
15
16E
17E 7.5
LCC AIR ASIA BHD
Malaysia
6.6
8.3
8.7
0.8
1.6
1.4
3.1
2.7
2.3
12.0
23.1
16.3
5.1
7.2
AIRARABI
UAE
12.4
11.1
10.4
1.3
1.3
1.3
6.6
6.9
7.1
10.2
11.0
13.1
8.3
8.0
7.5
CEBU AIR INC
Philippines
11.4
7.9
9.1
2.0
2.3
1.9
1.2
1.9
2.0
18.9
30.0
22.2
5.5
5.9
6.3
EASYJET PLC
Britain
12.8
9.6
8.8
3.1
1.7
1.6
3.1
5.1
5.5
24.8
17.8
17.4
8.0
5.4
4.9
RYANAIR HOLDINGS PLC
Ireland
17.8
12.4
11.0
3.8
3.5
3.3
0.0
2.1
0.0
23.7
31.2
34.0
10.5
7.8
7.0
SOUTHWEST AIRLINES
USA
12.2
9.5
9.3
3.8
2.5
2.1
0.7
1.0
1.3
30.9
31.1
25.5
5.5
4.3
4.3
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.
n.a.
VIRGIN AUSTRALIA HLDG
Australia
n.a.
17.5
22.3
1.4
1.0
1.1
0.0
0.0
0.0
(10.4)
2.9
7.5
16.3
8.4
7.0
WESTJET AIRLINES LTD
Canada
6.9
10.1
10.1
1.3
1.4
1.4
2.8
2.3
2.4
19.7
13.9
12.9
3.0
4.1
4.0
11.4
10.8
11.2
2.4
1.9
1.7
1.9
2.7
2.6
16.2
18.3
19.1
7.8
6.4
6.0 4.5
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
6.6
6.5
1.3
1.0
0.9
1.6
2.4
2.8
10.0
16.7
15.0
7.2
4.5
8.9
6.8
6.6
1.1
1.0
0.9
2.1
2.3
2.6
12.4
15.1
13.6
7.0
5.0
4.9
10.5
6.6
7.0
1.3
1.1
0.9
0.0
1.5
1.2
13.5
18.3
15.0
6.8
5.2
5.1
8.8
9.6
8.7
1.1
0.9
0.9
3.9
3.6
3.8
12.0
10.8
10.6
6.2
6.0
5.4
38.1
19.2
16.2
1.1
1.0
0.9
1.8
3.7
4.2
2.9
6.1
5.8
5.3
3.9
3.8
SINGAPORE AIRLINES LTD
Singapore
n.a.
n.a.
7.7
0.8
1.0
0.9
0.0
0.0
0.2
‐24.9
‐1.7
13.0
6.8
6.3
6.4
EVA AIRWAYS CORP
Taiwan
11.0
9.2
10.7
1.5
1.1
1.1
n.a.
1.4
1.5
15.5
12.2
11.0
5.8
5.2
5.0
CHINA AIRLINES LTD
Taiwan
Average (simple)
11.3
8.6
9.7
1.1
0.8
0.8
n.a.
1.5
1.7
10.8
9.1
8.0
6.1
5.1
5.1
14.5
9.5
9.1
1.2
1.0
0.9
1.6
2.0
2.2
6.5
10.8
11.5
6.4
5.2
5.0
Source: Bloomberg
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Network development Figure 5: Advanced bookings
Source: BA
Figure 6: Codeshare partners Figure 7: Fuel hedging as % of consumption
Source: BA
Figure 8: Fact sheet about Danang, Vietnam
Source: BA
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 Other income / exp. EBT Corporate tax Forex gain (loss) Extra items Gain (loss) from affiliates 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 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) Interest coverage (x)
2013 19,876 (15,034) 4,842 (3,186) 3,760 (2,103) 1,657 (1,766) 800 691 (140) 0 45 394 (58) 932 0.59 0.59 888 0.56 0.77
2014 21,033 (17,563) 3,470 (2,974) 2,887 (2,391) 496 (1,638) 1,087 (55) (1) 0 3 438 (35) 351 0.17 0.17 348 0.17 0.20
2015 23,113 (18,228) 4,885 (3,473) 3,886 (2,475) 1,412 (1,606) 1,467 1,272 (250) 323 0 504 (52) 1,797 0.86 0.86 1,474 0.70 0.70
2016E 25,644 (19,226) 6,417 (4,052) 4,971 (2,605) 2,366 (1,783) 1,776 2,359 (424) 106 (447) 711 (91) 2,215 1.05 1.05 2,556 1.22 1.00
2013 3,064 228 6,339 20,762 30,393 2,108 12,737 23,201 111 7,080 30,393
2014 13,700 272 7,034 27,573 48,579 1,119 12,235 23,147 123 25,309 48,579
2015 13,243 306 9,559 33,904 57,013 500 13,772 25,917 139 30,956 57,012
2016E 14,260 407 12,252 34,069 60,987 190 17,295 29,398 230 31,359 60,988
2013 932 573 416 (25) 1,897 1,691 (874) 817 (2,247) 845 (2,424) (3,826) (1,112) 2,714 1.72
2014 351 637 (597) (619) (228) 6,340 (17,372) (11,032) (1,453) 12,335 0 10,882 (378) (11,260) (5.36)
2015 1,797 834 (223) (616) 1,792 8,797 (3,938) 4,859 (3,253) (0) (945) (4,198) 2,453 6,651 3.17
2016E 2,215 1,004 (32) (1,138) 2,049 (50) 0 (50) 487 0 (1,470) (983) 1,016 1,999 0.95
2013 12.5 (3.5) (6.1) 24.4 18.9 8.3 4.7 4.5 12.9
2014 5.8 (23.2) (70.5) 16.5 13.7 2.4 1.7 1.7 0.1
2015 9.9 34.6 323.9 21.1 16.8 6.1 7.8 6.4 14.1
2016E 10.9 27.9 73.4 25.0 19.4 9.2 8.6 10.0 13.8
2013 0.68 1.66 2.05
2014 0.35 (0.01) 1.76
2015 0.32 0.03 2.26
2016E 0.36 0.10 2.55
2017E 28,330 (21,438) 6,893 (4,476) 5,282 (2,866) 2,416 (1,871) 1,978 2,523 (453) 0 0 757 (97) 2,731 1.30 1.30 2,731 1.30 1.06
2017E 17,859 449 13,603 34,362 66,273 25 21,482 34,090 326 31,856 66,273
2018E 21,235 474 14,248 34,551 70,508 0 24,716 37,681 431 32,395 70,508
2017E 2,731 1,056 63 (1,116) 2,733 (383) 0 (383) 3,340 0 (2,091) 1,249 3,599 2,350 1.12
2018E 29,874 (22,638) 7,236 (4,720) 5,691 (3,175) 2,516 (1,957) 2,196 2,755 (491) 0 0 806 (105) 2,965 1.41 1.41 2,965 1.41 1.15
2018E 2,965 1,062 21 (1,262) 2,785 (383) 0 (383) 3,208 0 (2,234) 974 3,376 2,401 1.14
2017E 10.5 6.3 6.8 24.3 18.6 8.5 9.6 9.6 13.8
2018E 5.4 7.7 8.6 24.2 19.1 8.4 9.9 9.9 13.8
2017E 0.40 0.11 2.58
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2018E 0.43 0.11 2.66
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, EARTH, CWT. KT ZMICO is a co‐underwriter of ALT, EKH, RJH, BCPG.
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.
Company Update
Close Bt25.25 Earnings upgrade/Earnings downgrade/Overview unchanged
Transport & Logistics
August 31, 2016
Better performance ahead Price Performance (%)
Reiterate BUY BA’s earnings in 2H16E are likely to continue growing upon entering the high season. We maintain our BUY call with the 2017E SOTP‐based TP of Bt32, implying PER of 25x, close to historical average PER of 26x for BA. Bright prospects for 3Q16E BA revealed 1.09mn advance ticket bookings currently, +16% YoY, of which 73% are scheduled to travel in Aug‐Dec 16 (41% to Samui and 18% to Indochina destinations). For July only, the cabin factor was expected to have stood at 73%, vs. 70% in Jul‐15. Meanwhile, the cabin factor between 1‐15 Aug was likely 80%, vs. 76% in Aug‐15. As such, we expect the 3Q16E earnings for BA to continue growing YoY. (BA reported net profit of only Bt579mn in 3Q15, including Bt178mn FX gain).
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.296
1.500
KT ZMICO vs. consensus Share data
‐19%
‐13.3%
Reuters / Bloomberg
BA.BK/BA TB
Paid‐up Shares (m)
2,100.00
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
53.00/1,534.00
Foreign limit / actual (%)
49.00/2.61
52 week High / Low (Bt)
27.50/19.50
Avg. daily T/O (shares 000) NVDR (%)
6,634.00 1.70
Estimated free float (%)
32.53
Beta
0.54
URL
www.bangkokair.com
CGR
Anti‐corruption
n.a.
Raenoo Bhandasukdi Analyst no. 17989 [email protected] 66 (0) 2695‐5836
More focus on Chinese destinations in 2H16 In 1H16, 47% of BA’s passenger revenue (Bt10.5bn, +11% YoY, 83% of total revenue) came from the Samui Island route, 25% from domestic destinations and 22% from Indochina destinations. The source of growth came mainly from the Samui route (+18% YoY) and Indochina (+14% YoY). BA will focus more on Chinese destinations in 2H16 by increasing frequency (Samui – Chengdu and Samui – Chongging) and introducing a new route (Samui – Guangzhou in Nov‐16). BA has a target to double the contribution of Chinese passengers in the future, vs. 4% of the total currently. BA also targets to add three codeshare partners in 2H16E, two from Chinese carriers. High potential for BKK‐Danang, Vietnam route in longer term In May‐16, BA introduced a new route to Danang (Vietnam). The cabin factor looked strong at 74% in May and it rose to 85% in July despite Vietnam airlines becoming a competitor in June. The new terminal at Danang International Airport is under construction and is expected to be finished in Mar‐17. BA targets to increase flight frequency to daily in Sep‐ 16, vs. four flights/week currently. In 2015, the airport served 6.72mn passengers, +35% YoY. 53%/58% of fuel usage for the next four quarters is hedged We believe the fluctuation of jet fuel prices is less likely to hurt BA’s performance as 53%/58% of the company’s fuel usage for 2H16/1H17 is currently hedged (average cost of around US$50‐57/barrel), vs. 75%/46% for AAV and 60%/40% for THAI. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. profit (Btmn) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) P/BV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 21,033 351 0.17 348 0.17 (70.53) 0.20 12.05 2014 152.49 2.10 13.70 0.79 2.15 cash
2015 23,113 1,797 0.86 1,474 0.70 323.89 0.70 14.74 2015 35.98 1.71 10.53 2.77 5.24 3.32
2016E 25,644 2,215 1.05 2,556 1.22 73.43 1.00 14.93 2016E 20.74 1.69 8.67 3.94 8.20 10.29
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2017E 28,330 2,731 1.30 2,731 1.30 6.83 1.06 15.17 2017E 19.42 1.66 8.24 4.21 8.64 11.45
2018E 29,874 2,965 1.41 2,965 1.41 8.57 1.15 15.43 2018E 17.89 1.64 7.62 4.57 9.23 10.75
Figure 1: Summary of sum‐of‐the‐parts (SOTP) valuation Company BA’s core business SPF BDMS
BA’s stake (%) 30.43 7.83
Valuation Method PER of 15x (average PER of regional airports & airline sector) DCF KT ZMICO research target price of Bt26
Total SOTP‐based valuation
Value to BA (Bt) 13.26 3.76 15.02
32.04
Source: KT ZMICO Research Figure 2: BA’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
2017E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
40.0 35.0
+1.0 S.D.
30.0
+0.5.0 S.D. Avg.
25.0
-0.5.S.D. -1.0 S.D.
20.0
Jul-16
Aug-16
Jun-16
Apr-16
May-16
Mar-16
Jan-16
Feb-16
Dec-15
Oct-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Jan-15
Feb-15
10.0
Nov-15
15.0
Sep-15
-2.0 S.D.
PER (x) 31.0 28.5 26.0 23.5 21.0 18.5 16.0 13.5
Implied market price (Bt) 40.30 37.05 33.80 30.55 27.30 24.05 20.80 17.55
Upside/Downside vs. current market price (%) 59.6 46.7 33.9 21.0 8.1 (4.8) (17.6) (30.5)
Source: Bloomberg, KT ZMICO Research
Figure 3: Peer comparison COUNTRY
PER (x) 15
16E
PBV (x)
Yield (%)
ROE (%)
EV/EBITDA (x)
17E
15
16E
17E
15
16E
17E
15
16E
17E
15
16E
17E 7.5
LCC AIR ASIA BHD
Malaysia
6.6
8.3
8.7
0.8
1.6
1.4
3.1
2.7
2.3
12.0
23.1
16.3
5.1
7.2
AIRARABI
UAE
12.4
11.1
10.4
1.3
1.3
1.3
6.6
6.9
7.1
10.2
11.0
13.1
8.3
8.0
7.5
CEBU AIR INC
Philippines
11.4
7.9
9.1
2.0
2.3
1.9
1.2
1.9
2.0
18.9
30.0
22.2
5.5
5.9
6.3
EASYJET PLC
Britain
12.8
9.6
8.8
3.1
1.7
1.6
3.1
5.1
5.5
24.8
17.8
17.4
8.0
5.4
4.9
RYANAIR HOLDINGS PLC
Ireland
17.8
12.4
11.0
3.8
3.5
3.3
0.0
2.1
0.0
23.7
31.2
34.0
10.5
7.8
7.0
SOUTHWEST AIRLINES
USA
12.2
9.5
9.3
3.8
2.5
2.1
0.7
1.0
1.3
30.9
31.1
25.5
5.5
4.3
4.3
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.
n.a.
VIRGIN AUSTRALIA HLDG
Australia
n.a.
17.5
22.3
1.4
1.0
1.1
0.0
0.0
0.0
(10.4)
2.9
7.5
16.3
8.4
7.0
WESTJET AIRLINES LTD
Canada
6.9
10.1
10.1
1.3
1.4
1.4
2.8
2.3
2.4
19.7
13.9
12.9
3.0
4.1
4.0
11.4
10.8
11.2
2.4
1.9
1.7
1.9
2.7
2.6
16.2
18.3
19.1
7.8
6.4
6.0 4.5
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
6.6
6.5
1.3
1.0
0.9
1.6
2.4
2.8
10.0
16.7
15.0
7.2
4.5
8.9
6.8
6.6
1.1
1.0
0.9
2.1
2.3
2.6
12.4
15.1
13.6
7.0
5.0
4.9
10.5
6.6
7.0
1.3
1.1
0.9
0.0
1.5
1.2
13.5
18.3
15.0
6.8
5.2
5.1
8.8
9.6
8.7
1.1
0.9
0.9
3.9
3.6
3.8
12.0
10.8
10.6
6.2
6.0
5.4
38.1
19.2
16.2
1.1
1.0
0.9
1.8
3.7
4.2
2.9
6.1
5.8
5.3
3.9
3.8
SINGAPORE AIRLINES LTD
Singapore
n.a.
n.a.
7.7
0.8
1.0
0.9
0.0
0.0
0.2
‐24.9
‐1.7
13.0
6.8
6.3
6.4
EVA AIRWAYS CORP
Taiwan
11.0
9.2
10.7
1.5
1.1
1.1
n.a.
1.4
1.5
15.5
12.2
11.0
5.8
5.2
5.0
CHINA AIRLINES LTD
Taiwan
Average (simple)
11.3
8.6
9.7
1.1
0.8
0.8
n.a.
1.5
1.7
10.8
9.1
8.0
6.1
5.1
5.1
14.5
9.5
9.1
1.2
1.0
0.9
1.6
2.0
2.2
6.5
10.8
11.5
6.4
5.2
5.0
Source: Bloomberg
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Network development Figure 5: Advanced bookings
Source: BA
Figure 6: Codeshare partners Figure 7: Fuel hedging as % of consumption
Source: BA
Figure 8: Fact sheet about Danang, Vietnam
Source: BA
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 Other income / exp. EBT Corporate tax Forex gain (loss) Extra items Gain (loss) from affiliates 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 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) Interest coverage (x)
2013 19,876 (15,034) 4,842 (3,186) 3,760 (2,103) 1,657 (1,766) 800 691 (140) 0 45 394 (58) 932 0.59 0.59 888 0.56 0.77
2014 21,033 (17,563) 3,470 (2,974) 2,887 (2,391) 496 (1,638) 1,087 (55) (1) 0 3 438 (35) 351 0.17 0.17 348 0.17 0.20
2015 23,113 (18,228) 4,885 (3,473) 3,886 (2,475) 1,412 (1,606) 1,467 1,272 (250) 323 0 504 (52) 1,797 0.86 0.86 1,474 0.70 0.70
2016E 25,644 (19,226) 6,417 (4,052) 4,971 (2,605) 2,366 (1,783) 1,776 2,359 (424) 106 (447) 711 (91) 2,215 1.05 1.05 2,556 1.22 1.00
2013 3,064 228 6,339 20,762 30,393 2,108 12,737 23,201 111 7,080 30,393
2014 13,700 272 7,034 27,573 48,579 1,119 12,235 23,147 123 25,309 48,579
2015 13,243 306 9,559 33,904 57,013 500 13,772 25,917 139 30,956 57,012
2016E 14,260 407 12,252 34,069 60,987 190 17,295 29,398 230 31,359 60,988
2013 932 573 416 (25) 1,897 1,691 (874) 817 (2,247) 845 (2,424) (3,826) (1,112) 2,714 1.72
2014 351 637 (597) (619) (228) 6,340 (17,372) (11,032) (1,453) 12,335 0 10,882 (378) (11,260) (5.36)
2015 1,797 834 (223) (616) 1,792 8,797 (3,938) 4,859 (3,253) (0) (945) (4,198) 2,453 6,651 3.17
2016E 2,215 1,004 (32) (1,138) 2,049 (50) 0 (50) 487 0 (1,470) (983) 1,016 1,999 0.95
2013 12.5 (3.5) (6.1) 24.4 18.9 8.3 4.7 4.5 12.9
2014 5.8 (23.2) (70.5) 16.5 13.7 2.4 1.7 1.7 0.1
2015 9.9 34.6 323.9 21.1 16.8 6.1 7.8 6.4 14.1
2016E 10.9 27.9 73.4 25.0 19.4 9.2 8.6 10.0 13.8
2013 0.68 1.66 2.05
2014 0.35 (0.01) 1.76
2015 0.32 0.03 2.26
2016E 0.36 0.10 2.55
2017E 28,330 (21,438) 6,893 (4,476) 5,282 (2,866) 2,416 (1,871) 1,978 2,523 (453) 0 0 757 (97) 2,731 1.30 1.30 2,731 1.30 1.06
2017E 17,859 449 13,603 34,362 66,273 25 21,482 34,090 326 31,856 66,273
2018E 21,235 474 14,248 34,551 70,508 0 24,716 37,681 431 32,395 70,508
2017E 2,731 1,056 63 (1,116) 2,733 (383) 0 (383) 3,340 0 (2,091) 1,249 3,599 2,350 1.12
2018E 29,874 (22,638) 7,236 (4,720) 5,691 (3,175) 2,516 (1,957) 2,196 2,755 (491) 0 0 806 (105) 2,965 1.41 1.41 2,965 1.41 1.15
2018E 2,965 1,062 21 (1,262) 2,785 (383) 0 (383) 3,208 0 (2,234) 974 3,376 2,401 1.14
2017E 10.5 6.3 6.8 24.3 18.6 8.5 9.6 9.6 13.8
2018E 5.4 7.7 8.6 24.2 19.1 8.4 9.9 9.9 13.8
2017E 0.40 0.11 2.58
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
2018E 0.43 0.11 2.66
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, EARTH, CWT. KT ZMICO is a co‐underwriter of ALT, EKH, RJH, BCPG.
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.
