Airports of Thailand: Key proxy of Thailand’s tourism recovery
- 3QFY24 results in line; net profit surged 45% y/y supported by growth in both aero- and non-aero revenue
- 9M24 net profit comprised 76% of our FY24 forecasts
- Positive outlook intact; earnings to continue recovery in line with recovering tourist arrivals
- Maintain BUY with a DCF-based TP of THB73
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Revenue surged 27% y/y to Bt16.4bn in 3QFY24. Growth came from both aeronautical (48% of total revenue) and non-aeronautical (52% of total revenue) revenue. On a q/q basis, revenue eased 10% from the seasonal effect.
Aeronautical revenue rose 29% y/y to Bt7.8bn in 3Q24 due to the increase in the number of flights, both incoming and departing. Total number of flights surged 19% y/y, mainly boosted by international flights, which jumped 24% y/y while domestic flights only inched up 1% y/y, attributed to airlines reallocating fleets to serve more international flights. Total number of passengers grew 26% y/y.
Non-aeronautical revenue grew 24% y/y. Most non-aeronautical revenue came from concession revenue, which rose 39% y/y to Bt5.8bn, in line with the rising number of passengers, as AOT is now charging concession revenue from King Power based on revenue per head.
Flight volume back to c.83% of the pre-pandemic level. The total number of international flights was back to 88% of the pre-pandemic level, while that of domestic flights was back to 81%.
Cashflow from operation came in strong at THB28.5bn in 9M24, up 133% y/y thanks to strong tourist arrivals. CAPEX amounted to only THB9.8bn, resulting in a large free cash flow of THB18.6bn. AOT, therefore, repaid some of its loans during the quarter.
Balance sheet in a net cash position of THB7.7bn at end-Jun 2024. Cash on hand and equivalent amounted to THB9.8bn. Interest-bearing debts amounted to THB2.1bn. We estimate that AOT will remain in a net cash position throughout our forecast period.
Outlook
Impact from the reclamation of duty-free area and removal of duty-free upon arrival to be felt from 4QFY24. The following table shows the impact from the THB237mn revenue loss per month from the reclamation of certain duty-free areas at Suvarnabhumi and Phuket airports from 1 Jul 2024 and the cessation of duty-free upon arrival from 1 Aug 2024. We have factored in the impact into our forecast. The net profit impact is around 10%.
Earnings to continue growing in FY24F and FY25F. We expect AOT’s core profit to jump 123% to Bt19.6bn in FY24, before rising further by 19% to Bt23.3bn in FY25. Growth should be supported by the bounce back in tourist arrivals and the end of assistance measures to airline operators and concessionaires.
Estimated capex of c.Bt10-13bn this year and next. AOT has plans to expand capacity at its existing airports as follows: (i) Suvarnabhumi – third runway and East expansion, (ii) Don Mueang – phase 3 expansion, (iii) Phuket – phase 2 expansion, and (iv) Chiang Mai – phase 1 expansion. As for FY24, management budgeted THB10bn in CAPEX. Of the total, Bt6.4bn would be for the third runway at Suvarnabhumi Airport (to be opened in July 2024), Bt0.5bn for Suvarnabhumi Airport phase II, and the remainder for general maintenance. For next year, the company has budgeted THB13bn for CAPEX, to be funded by cash flow from operations.
Management expansion to three regional airports estimated by Nov 2024. AOT plans to extend the management of its airports to three other airports currently under the supervision of the Department of Airports (DOA) – the Udon Thani, Buriram, and Krabi Airports. The company is now waiting for the CAA of Thailand to provide/issue the Public Aerodrome Operating Certificates of these three airports, following the handover from the Department of Airports. It is anticipated that the certification process will be concluded in Nov 2024.
Recommendation
Reiterate BUY with DCF-based TP of Bt73. We believe AOT is a prime beneficiary of tourism recovery in Thailand. We like the stock for its (i) deemed monopolistic status, (ii) robust earnings growth outlook, (iii) strong cash flow-generating capacity post-COVID-19, (iv) solid balance sheet in a net cash position, and (v) potential upside risks from several expansion projects. The stock now offers a 26% upside to our DCF-based TP of Bt73.
FY Sep | 3Q2023 | 2Q2024 | 3Q2024 | % chg y/y | % chg q/q |
Revenue | 12,954 | 18,234 | 16,405 | 26.6 | (10.0) |
Cost of Goods Sold | (5,414) | (7,059) | (7,064) | 30.5 | 0.1 |
Gross Profit | 7,540 | 11,176 | 9,341 | 23.9 | (16.4) |
Other Oper. (Exp)/Inc | (2,895) | (3,007) | (3,041) | 5.0 | 1.1 |
Operating Profit | 4,645 | 8,169 | 6,299 | 35.6 | (22.9) |
Other Non Opg (Exp)/Inc | 90.4 | 97.0 | 212 | 134.2 | 118.2 |
Associates & JV Inc | 0.0 | (0.1) | (0.3) | (1,894.3) | 317.3 |
Net Interest (Exp)/Inc | (712) | (698) | (666) | 6.5 | 4.7 |
Exceptional Gain/(Loss) | 105 | (90.0) | (52.5) | - | (41.7) |
Pre-tax Profit | 4,129 | 7,477 | 5,793 | 40.3 | (22.5) |
Tax | (822) | (1,504) | (1,175) | 42.9 | (21.9) |
Minority Interest | (151) | (188) | (55.3) | 63.4 | (70.5) |
Net Profit | 3,156 | 5,786 | 4,563 | 44.6 | (21.1) |
Net profit bef Except. | 3,051 | 5,876 | 4,615 | 51.3 | (21.5) |
EBITDA | 6,906 | 11,076 | 9,382 | 35.9 | (15.3) |
Margins (%) |
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Gross Margins | 58.2 | 61.3 | 56.9 |
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Opg Profit Margins | 35.9 | 44.8 | 38.4 |
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Net Profit Margins | 24.4 | 31.7 | 27.8 |
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