Airports of Thailand - Beneficiary of Thailand's tourism recovery

This post was created in partnership with SGX. All views and opinions expressed in this article are Beansprout's objective and professional opinions. 

TL;DR

• Airports of Thailand (AOT) operates six major airports in Thailand, including the Suvarnabhumi Airport (BKK) and Don Mueang International Airport (DMK) in Bangkok. Across its airports, AOT accounts for over 80% of Thailand’s air traffic. 
• AOT generated 32% of its revenue from departure passenger service charges (PSC) across both international and domestic flights in FY2022. With the re-opening of international borders, revenue from PSC soared to THB 8.3 billion in the first half of FY2023 from THB 1.2 billion in the previous year. 
• Despite the recovery, AOT’s passenger volume remains more than 30% below pre-COVID levels. Further tourist arrival growth is expected with the return of Chinese tourists, which represent about 33% of total arrivals in 2019. 
• AOT’s capacity is expected to grow further from 2023, as the development of Suvarnabhumi Phase II will allow it to carry another 15 million passengers per year, an increase of 33% from its current capacity. AOT will also take over the management of three airports in Thailand, including the Krabi International Airport under a new 9.19-billion-baht air transport development project.

What happened?

Airports of Thailand (AOT) Singapore Depository Receipts will be launched on the Singapore Exchange from 30 May., and will trade under the stock code SGX: TATD.

What this means is that retail investors in Singapore will be able to gain access to AOT in the same way that they are buying and selling a Singapore stock.

Let us find out more about what AOT does, and if it is worth adding this stock to your watchlist.

What you need to know about Airports of Thailand (AOT)

#1 - AOT operates six major airports in Thailand, including Suvarnabhumi Airport

Airports of Thailand (AOT) operates six major airports across Thailand. This includes two airports in Bangkok - Suvarnabhumi Airport (BKK), Don Mueang International Airport (DMK) and four at regional sites - Chiang Mai International Airport (CNX), Hat Yai International Airport (HDY), Phuket International Airport (HKT) and Mae Fah Luang - Chiang Rai International Airport (CEI). 

Across its airports, AOT has a total passenger capacity of about 101 million per year. Bangkok airports Suvarnabhumi (BKK) and Don Mueang (DMK) have a combined capacity of about 75 million passengers per year. 

#2 - AOT’s airports account for over 80% of Thailand’s air traffic 

There are a total of 39 airports in Thailand, and most of the other airports are smaller in scale and owned by the Department of Civil Aviation (DCA), Royal Thai Navy, and Bangkok Airways Public Company Limited. 

AOT airports handled a total number of 46.69 million passengers in FY2022, comprising 13.90 million international passengers and 32.79 million domestic passengers. This was more than double the total number of passengers from the previous year. Overall, AOT's airports account for over 80% of Thailand's air traffic. 

#3 - AOT's revenue has recovered with higher air traffic

AOT generates a sizeable portion of its revenue from aeronautical services, including departure passenger service charges across both international and domestic flights. 

It also generates revenue from non-aeronautical services, including concession fees from duty-free and souvenir stores at its airports.   

AOT’s revenue grew to 19.9 billion Thai Baht (THB) in the first half of fiscal year 2023 (ending March 2023), driven by a recovery in passenger traffic as its airports. In particular, passenger service charges grew to THB 8.3 billion from THB 1.2 billion in the previous year with the higher number of flights at its airports.

With the higher revenue, AOT generated a net profit of THB 2.2 billion in the first half of FY2023, reversing from a loss of THB 7.5 billion in the previous year. 

What are the drivers of Airports of Thailand (AOT)'s share price?

#1 - Thailand's air traffic has staged a recovery 

Aircraft and passenger movements have continued to pick up following the full re-opening of Thailand from 1 October 2022, with 1Q FY2023 (October to December 2022) movements tracking ahead of comparable periods in FY2022 and FY2023, but still below pre-Covid levels. 

International travelers arriving in Thailand are no longer required to show proof of vaccination and are not required to show ATK or RT-PCR test results.

#2 - Further growth could come from an increase in Chinese tourists

Full re-opening of Thailand would likely continue to lead to further recovery of tourist arrivals in Thailand. In particular, the reopening of China would be a key driver of international arrivals as China tourist arrivals made up 33% of Thailand’s total tourism arrivals in 2019. 

Sisdivachr Cheewarattanaporn, President of Association of Thai Travel Agents, noted that foreign arrivals in 2023 could exceed 30 million, citing the return of Chinese tour groups from February 6.

#3 - Capacity growth at existing airports

AOT’s capacity is expected to grow further from 2023, as the development of  Suvarnabhumi Phase II will allow it to carry another 15 million passengers per year, an increase of 33% from its current capacity.

What are the risks facing AOT?

#1 - Weaker concession revenue

AOT generates a significant portion of its revenue from granting concessions to other companies to operate various airport services, including duty free shops and food and beverage (F&B) outlets. As a result, its revenue could be impacted when the business prospects of these duty free shops and F&B outlets weaken significantly, like during the Covid-19 pandemic. 

#2 - Slower than expected recovery in tourist arrivals

With AOT’s revenue dependent on tourist arrivals into Thailand, a slower than expected recovery in air travel could dampen the company’s earnings in the coming years. In particular, its revenue could see a weaker than expected Chinese tourist arrivals do not pick up as strongly as expected. 

How can investors gain access to AOT?

The AOT Thai SDR will trade on the SGX under the stock code TATD from 30th May.

SDRs trade on the Singapore Exchange in Singapore Dollars (SGD). The same trading hours for the Singapore Exchange apply to the trading of SDRs, which is 9 am to 5.16 pm SGT currently. 

SDRs are tradable by all investor types, as they are classified as Excluded Investment Products (EIP). While this product is available to anyone with a basic understanding of financial instruments, do make sure that you are aware of the product characteristics and risks before you invest in it. 

You will be able to buy Singapore Depository Receipts directly through a stock trading platform which offers trading on the Singapore Exchange. 

Click here to read our earlier article explaining what are Singapore Depository Receipts. 

For a more detailed analysis on Airports of Thailand, download the full report here.

You can also find more resources at the SGX product page.