Asia Aviation

The share price of Aviation stocks in the Thai stock market closed higher on Tuesday as concerns over the coronavirus omicron variant subsided. Bangkok Airways Public Company Limited (SET: BA) closed at ฿10.30/share, increased ฿0.50/share or 5.10%. Asia Aviation Public Company Limited (SET: AAV) closed at ฿2.62/share, increased ฿0.10/share or 3.97%. Airports of Thailand Public Company Limited (SET: AOT) closed at ฿61.50/share, increased ฿2.25/share or 3.80%. According to the basic study, the new strain of Covid-19, omicron, is more contagious than the delta variant, but has a lower severity rate. The South African doctor who discovered the variant told reporters that the patient only had mild symptoms. The case in Thailand that was discovered yesterday on a man who travelled from Spain also had a mild symptom as well. Meanwhile, the new Covid-19 strain first found in South Africa nearly two weeks ago and is now called omicron created turbulence across the capital market during this past week as scientists are putting more speed on the research of this new variant and testing existing vaccine efficacy against it. The results should be coming out by this week or next. FSS International Investment Advisory (FSSIA) has given a “BUY” recommendation on BA with a target price at ฿16.00/share. FSSIA believed BA will start to benefit from its airport business in 2022 onward. Looking back, in 2019, the profit of the airport business was thin as the operating cost for Samui Airport was embedded in BA’s financials, while BA only recognised c30% of the total passenger service charges and landing fees for Samui Airport through Samui Property Fund (SPF). After the termination of the lease contract with SPF, BA has consolidated Samui Airport and will recognise all passenger service charges and landing fees. In the meantime, FSSIA also gave a “BUY” recommendation on AOT with a target price at ฿79.00/share. FSSIA stated that the key driver for a turnaround for AOT would be higher revenue from new concession contracts with King Power. AOT has waived the MG for the concession contract until Mar-22. Thus, AOT would receive higher concession revenue from Apr-22 onward. FSSIA expected the passenger volume to gradually recover to the pre-Covid level by FY24. However, concession revenue should surpass pre-Covid since FY23. Thus, FSSIA forecast earnings to exceed the pre-Covid level by FY23. Compared to other tourism stocks, AOT has highest potential to be the first stock whose earnings exceed the pre-Covid level, in its view.