Airports of Thailand: Flying through turbulence
- King Power requesting to terminate duty-free contracts
- AOT will hold BOD meeting on 16 June 2025 to address this matter and seek for the solution within two months
- We slash our earnings to reflect potential termination of duty-free contracts and conservatively assume a 20% revenue share for BKK concession contracts
- Maintain HOLD with lower TP of THB28.00
Related Stories
King Power showed intension to terminate duty-free concession agreements. According to Thai local media, on 28 May 2025, King Power Duty Free Co., Ltd. (KPD) submitted a letter to the President of Airports of Thailand requesting discussions on the possibility of terminating the concession agreements to operate duty-free shops under three concession agreements.
These agreements include (i) duty-free shops at Phuket, Chiang Mai, and Hat Yai airports (totally called Regional Airports), duty-free shops at Don Mueang Airport (DMK) and duty-free shops at Suvarnabhumi Airport (BKK). KPD has held the concession to operate at Regional Airports and BKK from 28 September 2020 until 31 March 2033. Whereas KPD has held the concession to operate at DMK from 1 October to 31 March 2033.
Due to various on-going issues that remain unresolved with unpredictable timeline, as well as concerns about fairness in AOT’s treatment of its contractual partners, KPD finds it essential to request discussions to explore possible resolutions - including consideration of terminating the duty-free concession agreements, to reach a settlement within 45 days.
During AOT’s consideration process, KPD will pay concession revenue based on 20% of monthly actual duty-free sales revenue starting from July 2025. Regarding the news, KPD previously granted a grace period for minimum guaranteed payments from September 2024 to June 2025.
AOT is holding BOD meeting on 16 June 2025. AOT acknowledged the letter from King Power on 4 June 2025. Whereas over the past week, AOT’s management has been actively seeking ways to negotiate with King Power. A proposal will be presented to the AOT Board of Directors (BOD) on 16 June 2025. The proposal seeks approval to establish a neutral committee, or third party, with no conflict interests.
This committee would comprise experts in business, law, finance, and distinguished professionals from various fields. Additionally, AOT plans to hire one or two academic institutions to serve as consultants. Their role would be to study possible approaches and provide comparative analysis in order to determine the fairest and most balanced solution within two months.
7 key arguments from KPD to terminate concession contracts. KPD believes the following factors are force majeure events and not caused by the company – which have both direct and indirect impacts preventing KPD from operating and fulfilling the contract as agreed. The details are as follows:
- The suspension of inbound duty-free shops due to government policy from 1 August 2024, affecting the calculation method of compensation payments unfairly and significantly differing from the intent of the TOR contract
- The reduction of taxes on wine products, resulting in decreased sales
- AOT’s request to return part of the operating space (c. 491.220 sq. m.) starting 1 July 2024, with AOT adjusting the compensation calculation proportionally, which impacts sales volume
- Lack of proactive government measures in managing tourist safety,
leading to a decline in Chinese tourists - Domestic issues negatively affecting tourist numbers and passenger volume,
such as relocation of foreign manufacturing bases, closures of companies in various industries, cybercrime (call centre scams), and the collapse of the Office of the Auditor General building from the earthquake - The ongoing impact of the COVID-19 pandemic
- The situation of war and the global economic slowdown
Implication to AOT’s financial statement
Negative impact from absence of King Power’s duty-free revenue in DMK and Regional Airports. At DMK, King Power has two key concession revenue with AOT consisting duty-free and commercial agreement which contributed THB702mn and THB338mn to AOT’s revenue in FY24F, respectively. For the concession agreement in Regional Airports, it contributed THB1,495mn to AOT’s revenue in FY24F.
The concession revenue from these contracts accounted for c.11% of AOT’s FY24 concession revenue and c. 4% of AOT’s FY24F total revenue. Nonetheless, we estimate the earnings from this concession revenue should also attribute c.11% of AOT’s FY24 net profit (or c.9% of net profit excluding commercial revenue at DMK). Thus, the termination would negatively impact AOT’s earnings.
The impact from the termination of the BKK contract would be material if approved. Unlike the contracts for DMK and the Regional Airports, the BKK contract contributes significantly to AOT’s revenue. In FY2024, BKK generated c. THB10.9bn in duty-free revenue and THB4.3bn in commercial revenue. Together, these contracts accounted for c.65% of AOT’s total concession revenue and c.23% of AOT’s forecast total revenue for FY2024.
Our take
Exclude duty-free concession revenue from KPD in DMK and Regional Airports from July 2025. In our current forecast, we now conservatively assume no duty-concession revenue from KPD from July 2025 and assume no new operator replacing KPD throughout our forecast (until FY34F) – which we previously assumed the revenue contribution to be THB2.0-3.3bn p.a.
Apply 20% sharing scheme for duty-free and commercial concession agreement for Suvarnabhumi Airport (BKK). In our previous forecast, we forecasted BKK duty-free and commercial revenue based on the contract term by calculating by using the higher of (i) minimum guarantee per head (with Mag I formular from original contract) or (ii) 20% of revenue sharing. According to management, King Power is paying at minimum guarantee per head rates which imply c.30% revenue sharing.
Nevertheless, at this point, we believe there is a very high likelihood that King Power Duty Free (KPD) will seek to renegotiate the terms of the BKK concession contract rather than proceed with a full termination. Therefore, we now assume that, starting from July 2025, AOT will continue to receive both duty-free and commercial concession revenues from the BKK agreements with King Power, based on a revised revenue-sharing model of 20%.
In FY24, the duty-free and commercial revenue at BKK was THB10.9bn and THB4.3bn, respectively. In our new forecast, we estimate the duty-free and commercial revenue at BKK to be THB7.0-11.8bn p.a. and THB3.1-4.5bn p.a. though our forecasts (1/3 discounted from previous forecast).
Potential upsides and downsides from our forecast. If AOT is able to appoint other operators to operate duty-free in DMK and regional airports to replace KPD, this could bring some upsides to our forecasts. Also, if AOT seizes King Power’s guarantee, it might also add some cash flow to the company.
Nonetheless, we also see potential downside risks in the event that King Power is unable to repay the accrued payments—recorded as non-current accounts receivable on AOT’s balance sheet—amounting to up to THB6.5bn. Additional risks include potential costs associated with sourcing new operators, as well as opportunity losses due to business disruption. In the scenario where King Power fully terminates both the duty-free and commercial contracts at BKK, we estimate a earnings loss of THB670mn per month, equivalent to c.3.8% of AOT’s FY26F earnings, until a new operator is in place and begins operations.
Maintain HOLD with lower DCF-based TP of THB28.0. We slashed our FY25-26F earnings forecasts by 9-20%, factoring the termination duty-free concession agreement with King Power in DMK and regional airports and assuming 20% revenue sharing of duty-free and commercial concession revenue at BKK instead of minimum guarantee per head scheme.
Additionally, we now assume a lower terminal growth of 1.5% (from 2.5%) and raise WACC to 9.8% (reflecting price volatility) in our DCF model. Thus, our TP slid from THB45.00 to THB28.00. With limited upsides and ongoing overhand from King Power, we maintain our HOLD call.
FY Sep | 2Q2024 | 1Q2025 | 2Q2025 | % chg y/y | % chg q/q |
Revenue | 18,234 | 17,664 | 17,906 | (1.8) | 1.4 |
Cost of Goods Sold | (7,059) | (7,282) | (7,520) | 6.5 | 3.3 |
Gross Profit | 11,176 | 10,382 | 10,385 | (7.1) | 0.0 |
Other Oper. (Exp)/Inc | (3,007) | (3,000) | (3,158) | 5.0 | 5.2 |
Operating Profit | 8,169 | 7,382 | 7,228 | (11.5) | (2.1) |
Other Non Opg (Exp)/Inc | 97.0 | 139 | 178 | 83.6 | 28.6 |
Associates & JV Inc | (0.1) | 0.58 | 0.07 | nm | (87.9) |
Net Interest (Exp)/Inc | (698) | (548) | (476) | 31.8 | 13.0 |
Exceptional Gain/(Loss) | (90.0) | (46.9) | (136) | (51.5) | 190.5 |
Pre-tax Profit | 7,477 | 6,926 | 6,793 | (9.1) | (1.9) |
Tax | (1,504) | (1,415) | (1,567) | 4.2 | 10.7 |
Minority Interest | (188) | (167) | (173) | 7.7 | 3.7 |
Net Profit | 5,786 | 5,344 | 5,053 | (12.7) | (5.4) |
Net profit bef Except. | 5,876 | 5,391 | 5,190 | (11.7) | (3.7) |
EBITDA | 11,076 | 10,509 | 10,388 | (6.2) | (1.1) |
Margins (%) |
|
|
|
|
|
Gross Margins | 61.3 | 58.8 | 58.0 |
|
|
Opg Profit Margins | 44.8 | 41.8 | 40.4 |
|
|
Net Profit Margins | 31.7 | 30.3 | 28.2 |
|
|
Access more at DBS Insights Direct
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). This report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVTH.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.
This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere.
There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.
Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.
DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
General | This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. |
Australia | This report is being distributed in Australia by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. DBS Bank Ltd, DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. |
Hong Kong | This report has been prepared by a personnel of DBS Bank, who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited (''DBS HK''), a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). DBS Bank Ltd., Hong Kong Branch is a limited liability company incorporated in Singapore. For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at [email protected] |
Indonesia | This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. |
Malaysia | This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. |
Singapore | This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6878 8888 for matters arising from, or in connection with the report. |
Thailand | This report is produced by DBS Vickers Securities (Thailand) Co Ltd which is regulated by the Securities and Exchange Commission, Thailand. For any query regarding the materials herein, please contact Chanpen Sirithanarattanakul at [email protected] |
United Kingdom | This report is produced by DBS Bank Ltd which is regulated by the Monetary Authority of Singapore. This report is disseminated in the United Kingdom by DBS Bank Ltd, London Branch (“DBS UK”). DBS Bank Ltd is regulated by the Monetary Authority of Singapore. DBS UK is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. In respect of the United Kingdom, this report is solely intended for the clients of DBS UK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS UK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. |
Dubai International Financial Centre | This communication is provided to you as a Professional Client or Market Counterparty as defined in the DFSA Rulebook Conduct of Business Module (the "COB Module"), and should not be relied upon or acted on by any person which does not meet the criteria to be classified as a Professional Client or Market Counterparty under the DFSA rules. This communication is from the branch of DBS Bank Ltd operating in the Dubai International Financial Centre (the "DIFC") under the trading name "DBS Bank Ltd. (DIFC Branch)" ("DBS DIFC"), registered with the DIFC Registrar of Companies under number 156 and having its registered office at units 608 - 610, 6th Floor, Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS DIFC is regulated by the Dubai Financial Services Authority (the "DFSA") with a DFSA reference number F000164. For more information on DBS DIFC and its affiliates, please see http://www.dbs.com/ae/our--network/default.page. Where this communication contains a research report, this research report is prepared by the entity referred to therein, which may be DBS Bank Ltd or a third party, and is provided to you by DBS DIFC. The research report has not been reviewed or authorised by the DFSA. Such research report is distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS DIFC. Unless otherwise indicated, this communication does not constitute an "Offer of Securities to the Public" as defined under Article 12 of the Markets Law (DIFC Law No.1 of 2012) or an "Offer of a Unit of a Fund" as defined under Article 19(2) of the Collective Investment Law (DIFC Law No.2 of 2010). The DFSA has no responsibility for reviewing or verifying this communication or any associated documents in connection with this investment and it is not subject to any form of regulation or approval by the DFSA. Accordingly, the DFSA has not approved this communication or any other associated documents in connection with this investment nor taken any steps to verify the information set out in this communication or any associated documents, and has no responsibility for them. The DFSA has not assessed the suitability of any investments to which the communication relates and, in respect of any Islamic investments (or other investments identified to be Shari'a compliant), neither we nor the DFSA has determined whether they are Shari'a compliant in any way. Any investments which this communication relates to may be illiquid and/or subject to restrictions on their resale. Prospective purchasers should conduct their own due diligence on any investments. If you do not understand the contents of this document you should consult an authorised financial adviser. |
United States | This report was prepared by DBSVTH. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. |
Other jurisdictions | In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. |
HONG KONG | SINGAPORE |
INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: William Simadiputra DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel: 62 21 3003 4900 Fax: 6221 3003 4943 e-mail: [email protected] | THAILAND |