Air Transportation
Transcription
Air Transportation
Industry Update Wednesday, April 01, 2015 Industry Update Air Transportation Air Transportation Rec : NEUTRAL AAV, AOT's prices overly absorb bad news The government is currently fixing the aviation problems after the DCA's operations failed to meet the ICAO's safety standard and resulted in some countries banning adding of new charter flights and destinations. However, international flights ban is unlikely. Prices of many air transportation stocks, e.g. AAV and AOT, have possibly overly reacted to the bad news. International flight ban not likely The International Civil Aviation Organization (ICAO), the regulator of aviation worldwide, flagged that the operation of the Department of Civil Aviation (DCA), the aviation authority of Thailand, does not meet the ICAO's safety standard. As a result, adding of new charter flights and new destination of flights from Thailand was banned in some countries e.g. Japan, South Korea, and China. The ban has raised concern about the worst-case scenario that every country might prohibit flights from Thai airlines, which would depress earnings of air transportation companies. However, this worst-case scenario is not likely to happen. The government is expected to deal with this problem as soon as possible (Thai air operations are expected to improve and meet the ICAO's standard in two months and all problems would be completely solved within eight months). After a recent direct negotiation between the government and Japan on this issue, Japan is currently considering whether to halt Thai charter flights in April and May. Sector Index : 218.9 SET Index : 1,505.94 AAV, AOT's prices overly absorb bad news The current situation has affected many airlines, e.g. NOKScoot's (NOK holding 24% stake), AirAsia X, THAI, and Asia Atlantic Airline. However, AAV would face a limited negative effect since AirAsia X that has flights to Japan and South Korea is only related to AAV but not as shareholders, but ban may still affect new flights to China though. Still, if the government can solve the problem quickly, AAV's new flights would be launched within 4Q15, so we maintain AAV's earnings forecast. The ban would have adverse effects on airlines, thus weakening AOT, Thailand's sole airport operator. However, according to the Minister of Transportation, the ban would lower AOT's flight volume by only 400 (down 0.06%) and weaken its and passenger volume by only 0.1 million or 0.1% from the forecast. Under our projection that all charter flights (less than 5% of AOT's total flight) were banned, AOT's net profit would be depressed by 15% from our initial forecast and its fair value would drop by 7.8% to B295. Not good entry point for AOT, but AAV is attractive As a result of the negative factor on the air transportation industry, we reiterate NEUTRAL. Given that the situation does not worsen, although the share price has already absorbed the bad news and shown a limited downside, there is also a limited upside since the new flights would been cancelled. We recommend holding AOT for speculation. For AAV(FV@B6), this is a good entry point. Key Data (Bm) FY: Dec 31 Sales Net Profit Norm Profit PER (x) PBV (x) ROE % ROA % Source : ASP Research FY12A 263,012.5 13,770.4 8,692.0 15.3 1.3 8.3 3.0 FY13A 268,502.2 4,482.2 4,369.4 61.1 1.6 2.7 0.9 FY14A 277,312.5 -1,595.4 -6,732.3 -307.5 2.7 -0.9 -0.3 FY15F 289,172.0 12,518.2 22,744.8 39.2 2.4 6.2 2.5 FY16F 286,823. 27,077.6 27,262.2 18.1 2.2 12.3 5.2 Kawee Manitsupavong License No.: 003974 [email protected] Suwat Wattanapornprom License No. : 044015 [email protected] This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts' interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities. Industry Update Research Department NOK Technical Chart Source : Bloomberg BA Technical Chart Source : Bloomberg THAI Technical Chart Source : ASP Research AAV Technical Chart Source : ASP Research AOT Technical Chart Key Recommendation Table Rec. AOT AAV BA THAI Source : ASP Research HOLD ถือ BUY ซื้อ BUY ซื้อ HOLD ถือ 2558F 30-Mar-15 2015F Close Fair value Upside EPS PER PBV (B) (B) (%) (B) (X) (X) 280.00 320.00 14% 11.61 24.1 3.7 5.15 6.00 16% 0.30 17.3 1.2 20.30 25.50 26% 0.88 23.0 1.6 11.00 15.30 39% (3.58) na. 0.7 Div (%) 1.66 0.00 1.74 0.00 Source : ASP Research 2