DMK

The share price of Airports of Thailand Public Company Limited (AOT) still has volatile trading sessions since the announcement of King Power’s first-year minimum guarantee for Don Mueang Airport at 1.5 billion baht, which was lower than investors had anticipated. Despite the plummet in share price on December 24, 2019, Mr. Nitinai Sirismatthakarn, President of AOT, asserted that the 1.5 billion baht of minimum guarantee, proposed by King Power, was higher than AOT had expected and also higher than the revenue forecast in 2022. As for analytic view on the company itself, KTB Securities (Thailand) (KTBST) has reiterated its BUY rating on AOT and a DCF-based target price of Bt88.00 (WACC of 7%, terminal growth of 4%). KTBST forecasts 1QFY20E net profit to grow +5% YoY, +31% QoQ to Bt6.7bn in light of higher passenger movement (+3% YoY, +8% QoQ) and a low base in 4QFY19 (due to a one-time provision for additional employee benefit of Bt730mn and a cyclical high HR expense). In FY20, KTBST projects net profit to grow +11% to Bt28bn as passenger movement is expected to increase +4%. Given a concession duty-free shop contract awarded to King Power and AOT's plan to open Satellite concourse at Suvarnabhumi Airport, KTBST believes FY21E net profit to soar +40% to Bt38.93bn. AOT's shares have outperformed the SET Index by 2% in three months but underperformed the index by 2% in a month. This indicates that the long-term outlook remains bright given rising passenger movement and a strong earnings growth in FY21 (+40% YoY), while the short-term sentiment has been damped by a lower-than-expected concession duty-free contract at Don Muang Airport and a risk in a 10% sharing of total PSC revenue to the Airport Development Fund, which would result in KTBST’s target price declining up to Bt5.00. The PSC revenue sharing looks likely to pressure the share price over the next 3-6 months while awaiting an interpretation by the Office of the Council of State.