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