Transport & Logistics (Aviation)
Transport & Logistics (Aviation) Industry Update
Overweight
June 19, 2015
One‐two punch
Share data (Transport & Logistics) SET index
1,508.04
Sector index
234.62
52‐week high
244.71
52‐week low
186.89
Market capitalization (Bt m)
855,519.13
% of market cap
6.04
Avg daily turnover (m shares)
442.38
Beta
0.84
Sector Performance (%)
1M
3M
12M
Absolute
2.62
2.56
23.47
Relative
3.83
4.04
20.25
Note: An executive of KT ZMICO Securities is also a member of PSL’s board.
Raenoo Bhandasukdi Analyst, no 17989 [email protected] 66 (0) 2695‐5836
Short‐term vulnerability expected Although Thai airline operators will be negatively impacted following the ICAO’s safety audit outcome, we believe the effect will be minimal. Moreover, we view that Thai airline operators’ safety standards are sufficient and they should be able to pass more stringent inspections by many countries. Although the first case of MERs in Thailand could further aggravate the sector, we believe this should only have a short‐ term impact. As such, we maintain our Overweight rating for the sector. We maintain AAV as our top pick, and replace NOK with BA owing to strong earnings growth prospects and less impact from the current problem. 1: ICAO’s red flag against Thai safety standards marked on website The ICAO has publicly marked a red flag against Thailand on its website due to its significant safety concerns (SSC) with respect to the ability of Thailand to properly oversee its airlines. Thailand has to implement and follow the corrective action plan to solve the problem. Impact to airlines will be minimal, in our view The risk from the ICAO’s update on Thai civil aviation is that civil aviation agencies of other countries may follow the ICAO with regard to implementing various measures against Thai airlines. For example, the U.S. Federal Aviation Administration (FAA) may downgrade Thai airlines to Category 2, which means that air carriers from Thailand will not be able to initiate new services and will be restricted to current levels of any existing service to the United States while corrective actions are underway. As for possible impacts on AAV, if Hong Kong, Singapore and China follow the ICAO, AAV’s net profit estimate will be cut by 6%. Meanwhile, the European Aviation Safety Agency (EASA) may ban some airlines from flying to Europe. However, we remain confident that the IATA’s member airlines (BA and THAI) will not be banned by the EASA given that safety inspections for the IATA’s member airlines are carried out under international safety standards. Moreover, according to THAI, the company has undergone additional and more frequent safety audits by authorities from many countries and THAI has been able to continue operating regularly. 2: First case of MERS virus found in Thailand Thailand confirmed its first case of MERS from a 75‐year‐old businessman from Oman, becoming the fourth Asian country to register the virus this year following China, the Philippines and South Korea. Although tourist arrivals to Thailand from South Korea and the Middle East contribute around 5% and 2%, respectively, compared to total tourist numbers, this could discourage tourists from other countries from traveling to Thailand until the problem is resolved. However, we believe there should be a short‐term impact as Thailand’s tourist industry has faced similar problems several times. In 2003 during the SAR’s outbreak, tourist numbers fell significantly for three months and returned to normal levels rapidly after the problem was resolved. At that time, THAI’s share price fell significantly by 15% from the end of Dec‐02 to the end of Apr‐03 and returned to the previous level in two months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: Rating and valuation summary AAV AOT* BA BECL BTS** NOK PSL THAI Average
Rating TP (Bt) Buy 7.40 Outperform 335.00 Buy 27.50 Outperform 44.00 Outperform 11.30 Buy 13.60 Underperform 13.50 Outperform 13.20
14 184.0 36.5 134.7 11.0 50.2 n.m. n.m. n.m. 83.3
PER (x) 15E 14.2 27.4 24.6 10.7 46.1 11.1 n.m. n.m. 22.4
16E 12.5 23.6 21.0 10.2 43.9 8.7 n.m. 16.9 19.5
14 1.1 4.5 1.9 1.4 2.4 1.7 0.7 0.7 1.8
PBV (x) 15E 1.1 4.1 1.8 1.3 2.3 1.5 0.9 0.8 1.7
16E 1.0 3.7 1.7 1.3 2.6 1.4 0.9 0.8 1.7
14 0.6 12.8 2.1 14.0 4.4 (11.3) (0.5) (31.8) (1.2)
ROE (%) 15E 7.8 15.7 7.4 12.8 4.9 14.4 (3.3) (13.4) 5.8
16E 8.4 16.5 8.3 12.6 5.6 16.9 (0.3) 4.6 9.1
Div. yield (%) 14 15E 16E ‐ 2.8 3.2 1.1 1.4 1.7 0.9 2.0 2.4 6.3 4.7 4.9 5.9 6.0 5.9 ‐ 4.5 5.7 2.1 ‐ ‐ ‐ ‐ ‐ 2.0 2.7 3.0
Source: KT ZMICO Research Note: *Fiscal year ended September, **Fiscal year ended March
Figure 2: Earnings summary Company AAV AOT* BA BECL BTS** NOK PSL THAI Total
Net profit (Btm) 14 15E 183 1,552 12,220 15,983 351 1,900 3,206 2,854 2,944 2,609 (472) 565 (80) (524) (15,612) (5,174) 2,741 19,766
16E 1,772 18,551 2,229 2,999 2,744 714 (48) 1,705 30,666
Norm. profit (Btm) 14 15E 16E 120 1,552 1,772 12,029 15,983 18,551 348 1,900 2,229 2,776 2,854 2,999 2,398 2,609 2,744 (472) 565 714 (76) (524) (48) (23,048) (5,174) 1,705 (5,925) 19,766 30,666
Norm. EPS (Bt) 14 15E 16E 0.02 0.32 0.37 8.42 11.19 12.99 0.17 0.90 1.06 3.61 3.71 3.89 0.20 0.22 0.23 (0.75) 0.90 1.14 (0.07) (0.34) (0.03) 0.78 (10.56) (2.37)
Norm. EPS growth (%) 14 15E 16E (86.8) 1,192.0 14.1 21.1 32.9 16.1 (70.5) 446.4 17.3 2.8 5.1 31.5 13.9 8.9 5.2 (144.2) n.m. 26.4 (81.9) 357.7 (90.8) 292.8 (77.6) n.m.
Source: KT ZMICO Research Note: *Fiscal year ended September, **Fiscal year ended March
Figure 3: Share price performance & relative performance vs. SETTRANS and SET AAV AOT BA BECL BTS NOK PSL THAI
Closed (Bt) 18/06/15 4.56 307.00 22.30 39.75 10.10 10.00 9.65 13.20
1W (1.7) (2.5) 3.2 1.9 3.1 (1.0) 10.3 1.5
Price change (%) 1M 3M (4.2) (15.6) 7.3 3.0 9.9 13.8 2.6 (3.0) 10.4 7.4 (5.7) (25.9) 5.5 (33.9) 7.3 13.8
12M 11.2 58.2 8.9 17.4 (42.2) (61.4) (15.9)
1W (1.5) (2.3) 3.5 2.1 3.3 (0.8) 10.5 1.8
Relative to SETTRANS 1M 3M (9.6) (18.0) 1.9 0.6 4.4 11.3 (2.8) (5.5) 5.0 5.0 (11.1) (28.4) 0.0 (36.4) 1.9 11.3
12M (15.5) 31.6 (17.8) (9.2) (68.9) (88.1) (42.6)
1W (2.0) (2.8) 3.0 1.7 2.8 (1.3) 10.0 1.3
Relative to SET 1M 3M (4.0) (14.0) 7.5 4.6 10.0 (1.5) 2.7 10.5 9.0 (5.5) (24.4) 5.6 (32.4) 7.5 15.3
Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
12M 7.3 54.3 5.0 13.5 (46.1) (65.3) (19.8)
Figure 4: ICAO’s safety audit information on Thailand Effective Implementation 100
Thailand Operations:69.84% In March 2015, ICAO has identified a significant safety concern with respect to the ability of this State to properly oversee its airlines (air operators) under its jurisdiction.
Effective Implementation (%)
90 80 70 60 50 40 30 20 10 0
Legislation Organization Licensing Operations Airworthiness Accident Air Aerodromes Investigation Navigation Services Global average Thailand
Source: ICAO Figure 5: AAV’s international passenger (40% of total) Figure 6: BA’s total passenger structure Singapore & HK, 4.0%
China 36%
Other, 2.8%
M/E, 2.5% Northern US, 3.7% Thai, 20.0%
Singapore ~4% Asia, 18.0%
Hong Kong ~2%
Internet, 24.0%
Other 36% Thai 22%
Europe, 25.0%
Source: AAV, BA Figure 7: SAR outbreak impact to tourist arrivals in 2003 Figure 8: Tourist arrivals by nationality (3M15) Person 1,400,000
Middle East 2%
1,200,000
Africa 0% 1,000,000
Oceania South Asia 3% 4% The Americas 4%
800,000
East Asia 63% Europe 24%
600,000
400,000
200,000
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Source: Department of Tourism REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Figure 9: 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. -0.50S.D.
20
Jun-15
Apr-15
Jan-15
Nov-14
Jun-14
Aug-14
Jan-14
Mar-14
Oct-13
Jun-13
Mar-13
Jan-13
Oct-12
Aug-12
May-12
10
Aug-13
-1 .0S.D.
15
2015E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 32.0 29.0 26.0 23.0 20.0 17.0 14.0 11.0
Implied market price (Bt) 10.24 9.28 8.32 7.36 6.40 5.44 4.48 3.52
Upside/Downside vs. current market price (%) 124.6 103.5 82.5 61.4 40.4 19.3 (1.8) (22.8)
Source: Bloomberg, KT ZMICO Research Figure 10: NOK’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
20 +2.0 S.D.
18
+1.0 S.D.
16 Avg.
14 -1.0 S.D.
12
-2.0 S.D.
10 8
Jun-15
Apr-15
Feb-15
Jan-15
Nov-14
Sep-14
Aug-14
Jun-14
Apr-14
Mar-14
Jan-14
Nov-13
Sep-13
Jun-13
Aug-13
6
2015E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 15.0 14.3 13.6 12.9 12.2 11.5 10.8 10.1
Implied market price (Bt) 13.50 12.87 12.24 11.61 10.98 10.35 9.72 9.09
Upside/Downside vs. current market price (%) 35.0 28.7 22.4 16.1 9.8 3.5 (2.8) (9.1)
Source: Bloomberg, KT ZMICO Research Figure 11: THAI’s P/BV band and sensitivity of market prices based on PER at different standard deviation levels (X) 2.8 2.5 2.3 2.0 1.8
+1.0 S.D.
1.5 1.3
Avg.
1.0 0.8 0.5
-1.0 S.D.
Jun-15
Oct-14
Feb-14
Jun-13
Oct-12
Mar-12
Jul-11
Nov-10
Jul-09
Mar-10
Nov-08
Mar-08
Aug-07
Apr-06
Dec-06
Aug-05
Apr-04
Jan-03
Aug-03
0.0
Dec-04
0.3
2015E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD
P/BV (x) 1.5 1.2 1.0 0.8 0.5 0.3 0.0
Implied market price (Bt) 25.59 21.44 17.29 13.14 8.99 4.84 0.69
Upside/Downside vs. current market price (%) 93.9 62.4 31.0 (0.5) (31.9) (63.3) (94.8)
Source: Bloomberg, KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Figure 12: Peer comparison COUNTRY
15‐16E
PER (x) 14
15E
PBV (x) 16E
14
15E
Yield (%) 16E
14
15E
ROE (%) 16E
14
15E
EV/EBITDA (x)
CAGR
16E
14
15E
16E
219.4
90.7
8.2
7.3
1.7
1.2
1.0
1.1
2.5
2.9
1.7
13.7
14.4
12.7
9.3
12.1
12.5
11.3
10.5
1.4
1.4
1.3
6.0
5.8
6.5
10.4
13.2
13.8
10.9
8.1
7.3
183.8
60.9
9.1
8.2
2.4
2.2
1.7
1.2
1.7
1.6
4.0
24.9
22.2
9.7
6.5
6.1 7.1
LCC 8.8
AIR ASIA BHD
Malaysia
AIRARABI
UAE
CEBU AIR INC
Philippines
EASYJET PLC
Britain
12.1
12.4
12.8
11.5
2.6
2.6
2.4
3.2
3.7
3.5
21.5
21.9
21.6
7.5
7.8
RYANAIR HOLDINGS PLC
Ireland
37.3
20.6
17.5
15.6
3.2
4.1
3.4
0.0
2.9
0.6
15.9
24.9
24.6
10.3
10.1
9.2
SOUTHWEST AIRLINES
USA
35.0
21.0
11.6
11.2
4.2
3.2
2.7
0.5
0.7
0.8
16.1
31.8
26.4
8.9
5.3
5.2
TIGER AIRWAYS HLDG
Singapore
n.a.
n.a.
n.a.
26.3
6.6
4.0
3.5
0.0
0.0
0.0
n.m.
n.m.
n.m.
n.a.
n.a.
9.3
VIRGIN AUSTRALIA HLDG
Australia
n.a.
n.a.
n.a.
16.6
1.4
1.5
1.4
0.0
0.0
0.0
(33.1)
(4.9)
8.8
81.7
9.5
6.0
WESTJET AIRLINES LTD
Canada
16.0
13.6
8.3
8.2
2.4
1.7
1.5
1.4
2.0
2.3
16.9
21.6
16.7
5.8
3.6
3.4
73.7
33.1
11.3
12.8
2.9
2.4
2.1
1.5
2.1
2.0
6.7
18.4
18.6
18.4
7.5
7.0
Conventional CHINA SOUTHERN AIRLINES‐H China
94.9
16.4
10.3
9.0
0.8
1.5
1.3
1.4
1.7
2.1
5.1
15.0
15.3
8.6
6.3
5.9
AIR CHINA LTD‐H
China
52.5
16.2
12.2
11.1
1.2
1.7
1.5
1.0
1.5
1.6
7.1
14.7
13.9
9.3
7.9
7.5
CATHAY PACIFIC AIRWAYS
Hong Kong
40.8
11.0
10.0
8.7
1.3
1.6
1.4
0.0
0.5
0.6
12.0
17.7
17.1
9.0
7.6
7.1
CHINA EASTERN AIRLINES‐H
China
57.8
21.1
11.3
9.9
1.3
1.3
1.2
2.1
3.2
3.7
5.5
12.7
13.0
8.2
6.5
6.1
KOREAN AIR LINES CO LTD
South Korea
48.5
34.2
38.1
17.2
0.9
1.1
1.0
2.0
1.8
3.5
2.7
2.9
6.3
4.4
4.3
4.1
Average (simple)
SINGAPORE AIRLINES LTD
Singapore
n.a.
n.a.
8.3
7.2
1.3
1.2
1.0
0.0
0.0
0.0
‐20.3
15.8
14.5
9.2
6.5
6.4
EVA AIRWAYS CORP
Taiwan
n.a.
n.a.
9.3
9.9
2.1
1.6
1.4
n.a.
0.6
0.3
‐3.7
19.2
13.8
9.3
5.6
6.1
CHINA AIRLINES LTD
Taiwan
Average (simple)
n.a.
n.a.
7.9
8.6
1.6
1.3
1.1
n.a.
0.8
0.5
‐1.5
16.1
12.0
9.3
5.7
5.8
58.9
19.8
13.4
10.2
1.3
1.4
1.2
1.1
1.3
1.5
0.9
14.3
13.3
8.4
6.3
6.1
Source: Bloomberg
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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th
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.
Overweight
June 19, 2015
One‐two punch
Share data (Transport & Logistics) SET index
1,508.04
Sector index
234.62
52‐week high
244.71
52‐week low
186.89
Market capitalization (Bt m)
855,519.13
% of market cap
6.04
Avg daily turnover (m shares)
442.38
Beta
0.84
Sector Performance (%)
1M
3M
12M
Absolute
2.62
2.56
23.47
Relative
3.83
4.04
20.25
Note: An executive of KT ZMICO Securities is also a member of PSL’s board.
Raenoo Bhandasukdi Analyst, no 17989 [email protected] 66 (0) 2695‐5836
Short‐term vulnerability expected Although Thai airline operators will be negatively impacted following the ICAO’s safety audit outcome, we believe the effect will be minimal. Moreover, we view that Thai airline operators’ safety standards are sufficient and they should be able to pass more stringent inspections by many countries. Although the first case of MERs in Thailand could further aggravate the sector, we believe this should only have a short‐ term impact. As such, we maintain our Overweight rating for the sector. We maintain AAV as our top pick, and replace NOK with BA owing to strong earnings growth prospects and less impact from the current problem. 1: ICAO’s red flag against Thai safety standards marked on website The ICAO has publicly marked a red flag against Thailand on its website due to its significant safety concerns (SSC) with respect to the ability of Thailand to properly oversee its airlines. Thailand has to implement and follow the corrective action plan to solve the problem. Impact to airlines will be minimal, in our view The risk from the ICAO’s update on Thai civil aviation is that civil aviation agencies of other countries may follow the ICAO with regard to implementing various measures against Thai airlines. For example, the U.S. Federal Aviation Administration (FAA) may downgrade Thai airlines to Category 2, which means that air carriers from Thailand will not be able to initiate new services and will be restricted to current levels of any existing service to the United States while corrective actions are underway. As for possible impacts on AAV, if Hong Kong, Singapore and China follow the ICAO, AAV’s net profit estimate will be cut by 6%. Meanwhile, the European Aviation Safety Agency (EASA) may ban some airlines from flying to Europe. However, we remain confident that the IATA’s member airlines (BA and THAI) will not be banned by the EASA given that safety inspections for the IATA’s member airlines are carried out under international safety standards. Moreover, according to THAI, the company has undergone additional and more frequent safety audits by authorities from many countries and THAI has been able to continue operating regularly. 2: First case of MERS virus found in Thailand Thailand confirmed its first case of MERS from a 75‐year‐old businessman from Oman, becoming the fourth Asian country to register the virus this year following China, the Philippines and South Korea. Although tourist arrivals to Thailand from South Korea and the Middle East contribute around 5% and 2%, respectively, compared to total tourist numbers, this could discourage tourists from other countries from traveling to Thailand until the problem is resolved. However, we believe there should be a short‐term impact as Thailand’s tourist industry has faced similar problems several times. In 2003 during the SAR’s outbreak, tourist numbers fell significantly for three months and returned to normal levels rapidly after the problem was resolved. At that time, THAI’s share price fell significantly by 15% from the end of Dec‐02 to the end of Apr‐03 and returned to the previous level in two months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: Rating and valuation summary AAV AOT* BA BECL BTS** NOK PSL THAI Average
Rating TP (Bt) Buy 7.40 Outperform 335.00 Buy 27.50 Outperform 44.00 Outperform 11.30 Buy 13.60 Underperform 13.50 Outperform 13.20
14 184.0 36.5 134.7 11.0 50.2 n.m. n.m. n.m. 83.3
PER (x) 15E 14.2 27.4 24.6 10.7 46.1 11.1 n.m. n.m. 22.4
16E 12.5 23.6 21.0 10.2 43.9 8.7 n.m. 16.9 19.5
14 1.1 4.5 1.9 1.4 2.4 1.7 0.7 0.7 1.8
PBV (x) 15E 1.1 4.1 1.8 1.3 2.3 1.5 0.9 0.8 1.7
16E 1.0 3.7 1.7 1.3 2.6 1.4 0.9 0.8 1.7
14 0.6 12.8 2.1 14.0 4.4 (11.3) (0.5) (31.8) (1.2)
ROE (%) 15E 7.8 15.7 7.4 12.8 4.9 14.4 (3.3) (13.4) 5.8
16E 8.4 16.5 8.3 12.6 5.6 16.9 (0.3) 4.6 9.1
Div. yield (%) 14 15E 16E ‐ 2.8 3.2 1.1 1.4 1.7 0.9 2.0 2.4 6.3 4.7 4.9 5.9 6.0 5.9 ‐ 4.5 5.7 2.1 ‐ ‐ ‐ ‐ ‐ 2.0 2.7 3.0
Source: KT ZMICO Research Note: *Fiscal year ended September, **Fiscal year ended March
Figure 2: Earnings summary Company AAV AOT* BA BECL BTS** NOK PSL THAI Total
Net profit (Btm) 14 15E 183 1,552 12,220 15,983 351 1,900 3,206 2,854 2,944 2,609 (472) 565 (80) (524) (15,612) (5,174) 2,741 19,766
16E 1,772 18,551 2,229 2,999 2,744 714 (48) 1,705 30,666
Norm. profit (Btm) 14 15E 16E 120 1,552 1,772 12,029 15,983 18,551 348 1,900 2,229 2,776 2,854 2,999 2,398 2,609 2,744 (472) 565 714 (76) (524) (48) (23,048) (5,174) 1,705 (5,925) 19,766 30,666
Norm. EPS (Bt) 14 15E 16E 0.02 0.32 0.37 8.42 11.19 12.99 0.17 0.90 1.06 3.61 3.71 3.89 0.20 0.22 0.23 (0.75) 0.90 1.14 (0.07) (0.34) (0.03) 0.78 (10.56) (2.37)
Norm. EPS growth (%) 14 15E 16E (86.8) 1,192.0 14.1 21.1 32.9 16.1 (70.5) 446.4 17.3 2.8 5.1 31.5 13.9 8.9 5.2 (144.2) n.m. 26.4 (81.9) 357.7 (90.8) 292.8 (77.6) n.m.
Source: KT ZMICO Research Note: *Fiscal year ended September, **Fiscal year ended March
Figure 3: Share price performance & relative performance vs. SETTRANS and SET AAV AOT BA BECL BTS NOK PSL THAI
Closed (Bt) 18/06/15 4.56 307.00 22.30 39.75 10.10 10.00 9.65 13.20
1W (1.7) (2.5) 3.2 1.9 3.1 (1.0) 10.3 1.5
Price change (%) 1M 3M (4.2) (15.6) 7.3 3.0 9.9 13.8 2.6 (3.0) 10.4 7.4 (5.7) (25.9) 5.5 (33.9) 7.3 13.8
12M 11.2 58.2 8.9 17.4 (42.2) (61.4) (15.9)
1W (1.5) (2.3) 3.5 2.1 3.3 (0.8) 10.5 1.8
Relative to SETTRANS 1M 3M (9.6) (18.0) 1.9 0.6 4.4 11.3 (2.8) (5.5) 5.0 5.0 (11.1) (28.4) 0.0 (36.4) 1.9 11.3
12M (15.5) 31.6 (17.8) (9.2) (68.9) (88.1) (42.6)
1W (2.0) (2.8) 3.0 1.7 2.8 (1.3) 10.0 1.3
Relative to SET 1M 3M (4.0) (14.0) 7.5 4.6 10.0 (1.5) 2.7 10.5 9.0 (5.5) (24.4) 5.6 (32.4) 7.5 15.3
Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
12M 7.3 54.3 5.0 13.5 (46.1) (65.3) (19.8)
Figure 4: ICAO’s safety audit information on Thailand Effective Implementation 100
Thailand Operations:69.84% In March 2015, ICAO has identified a significant safety concern with respect to the ability of this State to properly oversee its airlines (air operators) under its jurisdiction.
Effective Implementation (%)
90 80 70 60 50 40 30 20 10 0
Legislation Organization Licensing Operations Airworthiness Accident Air Aerodromes Investigation Navigation Services Global average Thailand
Source: ICAO Figure 5: AAV’s international passenger (40% of total) Figure 6: BA’s total passenger structure Singapore & HK, 4.0%
China 36%
Other, 2.8%
M/E, 2.5% Northern US, 3.7% Thai, 20.0%
Singapore ~4% Asia, 18.0%
Hong Kong ~2%
Internet, 24.0%
Other 36% Thai 22%
Europe, 25.0%
Source: AAV, BA Figure 7: SAR outbreak impact to tourist arrivals in 2003 Figure 8: Tourist arrivals by nationality (3M15) Person 1,400,000
Middle East 2%
1,200,000
Africa 0% 1,000,000
Oceania South Asia 3% 4% The Americas 4%
800,000
East Asia 63% Europe 24%
600,000
400,000
200,000
Jan-03
Feb-03
Mar-03
Apr-03
May-03
Jun-03
Jul-03
Aug-03
Sep-03
Oct-03
Nov-03
Dec-03
Source: Department of Tourism REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Figure 9: 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. -0.50S.D.
20
Jun-15
Apr-15
Jan-15
Nov-14
Jun-14
Aug-14
Jan-14
Mar-14
Oct-13
Jun-13
Mar-13
Jan-13
Oct-12
Aug-12
May-12
10
Aug-13
-1 .0S.D.
15
2015E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 32.0 29.0 26.0 23.0 20.0 17.0 14.0 11.0
Implied market price (Bt) 10.24 9.28 8.32 7.36 6.40 5.44 4.48 3.52
Upside/Downside vs. current market price (%) 124.6 103.5 82.5 61.4 40.4 19.3 (1.8) (22.8)
Source: Bloomberg, KT ZMICO Research Figure 10: NOK’s PER band and sensitivity of market prices based on PER at different standard deviation levels (X)
20 +2.0 S.D.
18
+1.0 S.D.
16 Avg.
14 -1.0 S.D.
12
-2.0 S.D.
10 8
Jun-15
Apr-15
Feb-15
Jan-15
Nov-14
Sep-14
Aug-14
Jun-14
Apr-14
Mar-14
Jan-14
Nov-13
Sep-13
Jun-13
Aug-13
6
2015E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD ‐2.5SD
PER (x) 15.0 14.3 13.6 12.9 12.2 11.5 10.8 10.1
Implied market price (Bt) 13.50 12.87 12.24 11.61 10.98 10.35 9.72 9.09
Upside/Downside vs. current market price (%) 35.0 28.7 22.4 16.1 9.8 3.5 (2.8) (9.1)
Source: Bloomberg, KT ZMICO Research Figure 11: THAI’s P/BV band and sensitivity of market prices based on PER at different standard deviation levels (X) 2.8 2.5 2.3 2.0 1.8
+1.0 S.D.
1.5 1.3
Avg.
1.0 0.8 0.5
-1.0 S.D.
Jun-15
Oct-14
Feb-14
Jun-13
Oct-12
Mar-12
Jul-11
Nov-10
Jul-09
Mar-10
Nov-08
Mar-08
Aug-07
Apr-06
Dec-06
Aug-05
Apr-04
Jan-03
Aug-03
0.0
Dec-04
0.3
2015E +1.0SD +0.5SD Average ‐0.5SD ‐1.0SD ‐1.5SD ‐2.0SD
P/BV (x) 1.5 1.2 1.0 0.8 0.5 0.3 0.0
Implied market price (Bt) 25.59 21.44 17.29 13.14 8.99 4.84 0.69
Upside/Downside vs. current market price (%) 93.9 62.4 31.0 (0.5) (31.9) (63.3) (94.8)
Source: Bloomberg, KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Figure 12: Peer comparison COUNTRY
15‐16E
PER (x) 14
15E
PBV (x) 16E
14
15E
Yield (%) 16E
14
15E
ROE (%) 16E
14
15E
EV/EBITDA (x)
CAGR
16E
14
15E
16E
219.4
90.7
8.2
7.3
1.7
1.2
1.0
1.1
2.5
2.9
1.7
13.7
14.4
12.7
9.3
12.1
12.5
11.3
10.5
1.4
1.4
1.3
6.0
5.8
6.5
10.4
13.2
13.8
10.9
8.1
7.3
183.8
60.9
9.1
8.2
2.4
2.2
1.7
1.2
1.7
1.6
4.0
24.9
22.2
9.7
6.5
6.1 7.1
LCC 8.8
AIR ASIA BHD
Malaysia
AIRARABI
UAE
CEBU AIR INC
Philippines
EASYJET PLC
Britain
12.1
12.4
12.8
11.5
2.6
2.6
2.4
3.2
3.7
3.5
21.5
21.9
21.6
7.5
7.8
RYANAIR HOLDINGS PLC
Ireland
37.3
20.6
17.5
15.6
3.2
4.1
3.4
0.0
2.9
0.6
15.9
24.9
24.6
10.3
10.1
9.2
SOUTHWEST AIRLINES
USA
35.0
21.0
11.6
11.2
4.2
3.2
2.7
0.5
0.7
0.8
16.1
31.8
26.4
8.9
5.3
5.2
TIGER AIRWAYS HLDG
Singapore
n.a.
n.a.
n.a.
26.3
6.6
4.0
3.5
0.0
0.0
0.0
n.m.
n.m.
n.m.
n.a.
n.a.
9.3
VIRGIN AUSTRALIA HLDG
Australia
n.a.
n.a.
n.a.
16.6
1.4
1.5
1.4
0.0
0.0
0.0
(33.1)
(4.9)
8.8
81.7
9.5
6.0
WESTJET AIRLINES LTD
Canada
16.0
13.6
8.3
8.2
2.4
1.7
1.5
1.4
2.0
2.3
16.9
21.6
16.7
5.8
3.6
3.4
73.7
33.1
11.3
12.8
2.9
2.4
2.1
1.5
2.1
2.0
6.7
18.4
18.6
18.4
7.5
7.0
Conventional CHINA SOUTHERN AIRLINES‐H China
94.9
16.4
10.3
9.0
0.8
1.5
1.3
1.4
1.7
2.1
5.1
15.0
15.3
8.6
6.3
5.9
AIR CHINA LTD‐H
China
52.5
16.2
12.2
11.1
1.2
1.7
1.5
1.0
1.5
1.6
7.1
14.7
13.9
9.3
7.9
7.5
CATHAY PACIFIC AIRWAYS
Hong Kong
40.8
11.0
10.0
8.7
1.3
1.6
1.4
0.0
0.5
0.6
12.0
17.7
17.1
9.0
7.6
7.1
CHINA EASTERN AIRLINES‐H
China
57.8
21.1
11.3
9.9
1.3
1.3
1.2
2.1
3.2
3.7
5.5
12.7
13.0
8.2
6.5
6.1
KOREAN AIR LINES CO LTD
South Korea
48.5
34.2
38.1
17.2
0.9
1.1
1.0
2.0
1.8
3.5
2.7
2.9
6.3
4.4
4.3
4.1
Average (simple)
SINGAPORE AIRLINES LTD
Singapore
n.a.
n.a.
8.3
7.2
1.3
1.2
1.0
0.0
0.0
0.0
‐20.3
15.8
14.5
9.2
6.5
6.4
EVA AIRWAYS CORP
Taiwan
n.a.
n.a.
9.3
9.9
2.1
1.6
1.4
n.a.
0.6
0.3
‐3.7
19.2
13.8
9.3
5.6
6.1
CHINA AIRLINES LTD
Taiwan
Average (simple)
n.a.
n.a.
7.9
8.6
1.6
1.3
1.1
n.a.
0.8
0.5
‐1.5
16.1
12.0
9.3
5.7
5.8
58.9
19.8
13.4
10.2
1.3
1.4
1.2
1.1
1.3
1.5
0.9
14.3
13.3
8.4
6.3
6.1
Source: Bloomberg
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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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
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Telephone: (66-2) 686-1500
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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,
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A. Banglamung, Cholburi 20260
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A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
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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,
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Chiang Mai Branch
Phuket Branch
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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.
