The share price of Airports of Thailand Public Company Limited (SET: AOT) bounced back nearly 4% in the morning session on Wednesday. The rise followed a sharp plunge of 6% in the previous session after the company announced the amendment of its previous announcement on allowing a late payment of Minimum Annual Guarantee (MAG) for King Power by additional two months, citing liquidity problems from its concessionaires.
The original disclosure on February 17 indicated an extension from September 2024 – February 2025, but the revision on March 4 indicated an extension from September 2024 – April 2025.
Tisco Securities stated the only change was the timeframe for late payment of MAG by King Power Duty Free (KPD), from Sept 2024 – Feb 2025 to Sept 2024 – Apr 2025. The timeframe disclosed was apparently mixed-up with the allowed late payment timeframe of the minimum guarantee payment (MAG) by King Power Suvarnabhumi (KPS – the commercial arm of BKK) which was from Sept 2024 – Feb 2025.
However, Tisco noted that the inclusion of the deferred payment of KPS was previously unknown to the firm. While the downside risk for KPD, already incorporated into estimates, reaffirms its expectation that renegotiations will take place over the reduced terms for Duty Free, Tisco now incorporates KPS’s potential downside.
Tisco estimates an earnings hit of 6-8% on KPS from the 40% reduction to MAG, equivalent to a Bt2 cut in its target price. Though KPS has signaled a normalized MAG payment for Mar 2025, the securities company believes the long-term payment is not sustainable and renegotiation will take place with KPD.
Tisco Securities wrote in its research that it has cut the long-term passenger (PX) growth target for AOT from 4% to 3%, reflecting slower tourist arrivals due to potential terminal construction delays.
Prior to AOT’s announcement that King Power’s payment would be late (which prompted Tisco’s downgrade of AOT in mid-Jan), the firm estimated that AOT would enjoy Bt270bn in concession revenue from 2025-2032, helping fund the South Terminal’s opening in 2033. But including the latest cuts for both KPD and KPS, Tisco calculates that aggregate concession revenue has been reduced to Bt160bn for 2025-2032.
Tisco flags downside risk if AOT decides to use its own cashflow to fund the Bt300bn investment plan over the next 10 years, as it could result in some projects being delayed. Conversely, increasing borrowing to speed up projects is likely to incur additional interest expense.
The reduction in Tisco’s long-term passenger growth assumption results in its target price being reduced by an additional Bt4, bringing it down to Bt37 from Bt43; maintaining SELL. Key upside factor is the consistent payment of concession revenue at the elevated MAG level.
