Airports of PCL (AOT) BUY TP: Bt49.00 Expansion to expand income Closing price: Bt45.75 Upside/downside +7% ► Announced its 10-year expansion plan.

► To open new bidding for duty free and retail businesses. Sector Transportation & Logistics ► AOT and Treasury Department still negotiating. Paid-up shares (shares mn) 14,286 Market capitalization (Bt mn) 653,585 ► Recommend BUY with a target price of Bt49.00. Free float (%) 29.99 12-mth daily avg. turnover (Bt mn) 1,415 Expansion is needed. 12-mth trading range (Bt) 45.50/30.00 AOT announced its 10-year plan for investment in expansions at Phases 2, 3 and 4, with total investment of Major shareholders (%) Bt137bn, Don Muang Airport Terminal 3, with total investment of Ministry of Finance 70.00 Bt32bn, and Phuket Airport with total investment of Bt14.7bn. The Thai NVDR 3.47 expansions would help resolve the issue of overcapacity at these State Street Bank Europe Ltd 1.91 three international airports. Since the expansion of Don Muang Airport’s Terminal 2 in March 2016, it served 35mn passengers p.a. Financial highlights on its capacity of only 30mn passengers at the end of 2016, and it Year to Sep FY2015 FY2016 FY2017E FY2018E needs to increase capacity to serve 40mn passengers p.a. Phuket Revenue (Bt mn) 43,969 50,962 55,500 59,495 Airport after expansion in September 2016 served 14mn passengers Normalized profit (Bt mn) 15,755 19,482 23,301 24,845 Net profit (Bt mn) 18,729 19,571 22,036 24,845 by the end of 2016 from its capacity of 12mn passengers p.a.(from Normalized EPS (Bt) 1.10 1.36 1.63 1.74 6.5mn passenger p.a), and the next expansion is for serving 18mn EPS (Bt) 1.31 1.37 1.54 1.74 passengers p.a. Suvarnabhumi Airport Phase 2 is set to serve 60mn Normalized EPS grow th (%) 32.43 23.66 19.60 6.63 passengers from 45mn passengers currently. The target for EPS grow th (%) 53.27 4.50 12.59 12.75 Suvarnabhumi Phases 1-4 will be able to serve 120mn passengers P/E (x) 41.49 33.55 28.05 26.31 p.a. AOT expects the number of passengers through its six airports P/BV 6.01 5.38 5.06 4.66 to reach 181mn in the next 10 years, while the number is expected DPS (Bt) 0.65 0.68 0.76 0.87 Div. Yield (%) to reach 120mn passengers by the end of 2017, +7.8% YoY. 1.42 1.49 1.66 1.90 ROE (%) 5.19 4.20 3.51 3.59

Source: SETSMART, AWS To open new bidding for duty free and retail businesses.

By the end of 2017, AOT will open bidding for new contracts for duty

free and retail business as the contract with King Power will expire in 2020. It is in the process of seeking a partner for the new contract. This will increase revenue sharing for AOT under non-Aero business after 2020.

AOT and Treasury Department are still negotiating AOT and the Treasury Department are still negotiating the land usage rental fee. AOT paid Bt1.26bn for land usage rental fee and incremental rental fee of Don Muang Airport on 19 May 2016. It was Thailand Research Department recognized through its retained earnings. Suvarnabhumi Airport’s Mrs. Vajiralux Sanglerdsillapachai, rental fee is being negotiated. The final say is about the percent of License, No. 17385 revenue sharing for the usage areas, as 2-5% of ROA. It is likely to Tel: 02 680 5077 increase the rental fee at Suvarnabhumi from Bt1.5bn p.a. to less than Bt2.0bn p.a., so it should have little impact on AOT.

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Recommend BUY with the target price of Bt49.00. We have a positive view on AOT’s business, although it may have a lot of CAPEX, and overhang from an increase in rental fees, we believe it will not hurt net profit too much. The company has significant room to increase its revenues and restructure non-aero business to increase revenues when it renews the contract for duty free and retail business. We expect net profit growth of 12.6% YoY in 2017 and 12.8% YoY in 2018. Upside for revenue will be from 2020 onwards due to increased passenger numbers and revenue sharing from non-aero business. We maintain a BUY recommend for AOT with a target price of Bt49.00, based on DCF at 8.6% WACC.

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Income Statement (Btmn)

Year to 30 Sep FY2015 FY2016 FY2017E FY2018E FY2019E Total revenue 43,969 50,962 55,500 59,495 64,250 Operating expenses (21,455) (24,196) (26,500) (28,320) (30,500) EBIT 22,514 26,766 29,000 31,175 33,750 Other income(expenses) (547) (1,055) 1,214 1,295 1,200 Financial cost (1,605) (1,377) (1,394) (1,350) (1,414) Pre-tax profit 20,361 24,335 28,820 31,120 33,536 Corporate tax (4,585) (4,821) (5,469) (6,224) (6,707)

Net Profit before MI 15,776 19,514 23,351 24,896 26,829

Minority interests (21) (32) (50) (51) (55) Normalized profit 15,755 19,482 23,301 24,845 26,774 Extra-ordinary items 2,974 90 (1,264) 0 0 Net Profit 18,729 19,571 22,036 24,845 26,774 Normalized EPS (Bt) 1.10 1.36 1.63 1.74 1.87 EPS (Bt) 1.31 1.37 1.54 1.74 1.87 DPS (Bt) 0.65 0.68 0.76 0.87 0.94

Statement of Financial Position (Btmn)

Year to 31 Dec FY2015 FY2016 FY2017E FY2018E FY2019E Current Assets 51,925 64,157 52,500 61,000 73,500 Non-current Assets 107,699 108,059 142,000 145,000 145,500 Total assets 159,624 172,216 194,500 206,000 219,000 Current Liabilities 15,854 18,429 25,670 28,000 30,541 Non-current Liabilities 34,958 32,209 39,730 37,667 39,159 Total liabilities 50,812 50,638 65,400 65,667 69,700 Paid-up capital 14,286 14,286 14,286 14,286 14,286

Retained Earnings 79,695 92,124 95,553 97,410 98,302

Total equity 108,812 121,578 129,100 140,333 149,300 Total liabilities and equity 159,624 172,216 194,500 206,000 219,000 BVPS (Bt) 7.62 8.51 9.04 9.82 10.45 Cash Flow Statement (Btmn) Year to 31 Dec FY2015 FY2016 FY2017E FY2018E FY2019E Pretax Profit 23,335 24,424 28,820 31,120 33,536 Depreciation & Amortization 6,188 6,404 6,630 6,969 7,050

Operating Cash Flow 24,906 30,326 30,600 30,469 31,560

CAPEX (6,892) (4,906) (6,000) (7,000) (8,000) Investing Cash Flow (16,079) (14,722) (15,700) (17,900) (14,970) Dividend Payment (9,286) (9,714) (10,857) (12,429) (13,394) Financing Cash Flow (12,778) (12,803) (11,531) (14,300) (23,858) Net cash flow (3,951) 2,801 3,369 (1,731) (7,268) Beginning cash & equivalents 7,037 3,087 5,886 9,255 7,524 Ending cash & equivalents 3,087 5,887 9,255 7,524 257

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Quarterly Income Statement (Btmn) Year to 30 Sep FY2Q16 FY3Q16 FY4Q16 FY1Q17 FY2Q17

Total revenue 13,800 12,573 12,775 12,613 14,665

Operating expenses (6,093) (4,816) (7,336) (6,449) (6,060) EBIT 7,707 7,757 5,439 6,163 8,605 Other income(expenses) (349) (1,399) 353 327 (245) Financial cost (349) (339) (329) (319) (300) Pre-tax profit 7,009 6,019 5,464 6,172 8,059 Corporate tax (1,353) (1,186) (1,053) (1,319) (1,609) Net Profit before MI 5,657 4,833 4,411 4,853 6,450

Minority interests (14) 0 (8) (14) (18)

Normalized profit 5,642 4,833 4,403 4,839 6,432 Extra-ordinary items (76) 233 (89) 246 38 Net Profit 5,567 5,065 4,314 5,084 6,470 Normalized EPS (Bt) 0.39 0.34 0.31 0.34 0.45 EPS (Bt) 0.39 0.35 0.30 0.36 0.45

Key Financial Ratios Year to 31 Dec FY2015 FY2016 FY2017E FY2018E FY2019E

Sales growth (%) 17.0 15.9 8.9 7.2 8.0

Normalized profit growth (%) 32.4 23.7 19.6 6.6 7.8 Net profit growth (%) 53.3 4.5 12.6 12.7 7.8 Normalized EPS growth (%) 32.4 23.7 19.6 6.6 7.8 EPS growth (%) 53.3 4.5 12.6 12.7 7.8 EBIT margin (%) 51.2 52.5 52.3 52.4 52.5 Normalized profit margin (%) 35.8 38.2 42.0 41.8 41.7 Net profit margin (%) 42.6 38.4 39.7 41.8 41.7

Effective tax rate (%) 22.5 19.8 19.0 20.0 20.0

ROA (%) 9.9 11.7 12.7 12.4 12.6 ROE (%) 5.2 4.2 3.5 3.6 4.4 EV/EBITDA 23.3 20.3 19.1 17.9 16.8 Debt to equity (x) 0.5 0.4 0.5 0.5 0.5 P/E (x) 41.5 33.5 28.0 26.3 24.4 P/BV (x) 6.0 5.4 5.1 4.7 4.4 Dividend Yield (%) 1.4 1.5 1.7 1.9 2.0

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Corporate Governance Report disclaimer

The disclosure of the survey result of the Thai Institute of Directors Score Range Number of Logo Description Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The 90 – 100 Excellent survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment 80 – 89 Very Good disclosed to the public and able to be accessed by a general public 70 – 79 Good investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. 60 – 69 Satisfactory The survey result is as of the date appearing in the Corporate Governance 50 – 59 Pass Report of Thai Listed Companies. As a result, the survey result may be Below 50 No logo given N/A changed after that date, Asia wealth Securities Company Limited does not conform nor certify the accuracy of such survey result.

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Anti-Corruption Progress Indicator 2016 Companies that have declared their intention to join CAC 2S APCO BROOK CSS GFPT JMART LVT NCL PLANB SAUCE SR TICON TVD WIIK A APCS BRR DELTA GIFT JMT M NDR PLAT SC SRICHA TIP TVO WIN ABC APURE BSBM DNA GLOBAL JTS MAKRO NINE PRANDA SCCC STA TKT TVT XO ABICO AQUA BTNC EA GPSC JUBILE MALEE NMG PREB SCN STANLY TLUXE TWPC ZMICO ACAP AS CEN ECF GREEN JUTHA MBAX NNCL PRG SEAOIL SUPER TMC U AEC ASIA CGH EE GUNKUL K MC NPP PRINC SE-ED SUSCO TMI UBIS AF ASIAN CHARAN EFORL HMPRO KASET MCOT NTV PSTC SENA SYMC TMILL UKEM AGE ASIMAR CHO EPCO HOTPOT KBS MEGA NUSA PYLON SGP SYNEX TMT UNIQ AH ASK CHOTI ESTAR ICHI KC MFEC OCC QH SITHAI SYNTEC TPA UOBKH AI BCH CHOW EVER IEC KCAR MIDA OGC RML SKR TAE TPP UREKA AIE BEAUTY CI FC IFS KSL MILL PACE ROBINS SMIT TAKUNI TRT UWC AIRA BFIT CM FER ILINK KTECH MJD PAF ROCK SMK TASCO TRU VGI ALUCON BH COL FNS INET KYE MK PCA ROH SORKON TBSP TRUE VIBHA AMARIN BIGC CPALL FPI INOX L&E ML PCSGH ROJNA SPACK TEAM TSE VNG AMATA BJCHI CPF FSMART INSURE LALIN MPG PDG RP SPALI TFG TSI VNT ANAN BKD CPL FVC IRC LPN MTLS PDI RWI SPCG TFI TSTE WAVE AOT BLAND CSC GC J LRH NBC PIMO SAMCO SPPT THAI TTW WHA AP BROCK CSR GEL JAS LTX NCH PK SANKO SPRC TIC TU WICE Companies certified by CAC AKP BKI CPN ECL HTC KKP MINT PE PTG SAT SPC TGCI TNITY TVI AMANAH BLA CSL EGCO ICC KTB MONO PG PTT SCB SPI THANI TNL WACOAL ASP BTS DCC ERW IFEC KTC MOONG PHOL PTTEP SCC SSF THCOM TOG AYUD BWG DEMCO FE INTUCH LANNA MSC PM PTTGC SCG SSI THRE TOP BAFS CENTEL DIMET FSS IRPC LHBANK MTI PPP Q-CON SINGER SSSC THREL TPC BANPU CFRESH DRT GBX IVL LHK NKI PPS QLT SIS SVI TIPCO TPCORP BAY CIMBT DTAC GCAP KBANK MBK NSI PR RATCH SMPC TCAP TISCO TSC BBL CNS DTC GLOW KCE MBKET OCEAN PSL S & J SNC TCMC TMB TSTH BCP CPI EASTW HANA KGI MFC PB PT SABINA SNP TF TMD TTCL N/A AAV AU CBG CTW GJS KAMART M-CHAI PAP RCL SGF SUC TK TTA VIH ACC AUCT CCET CWT GL KCM MCS PATO RICH SHANG SUTHA TKN TTI VPO ADAM BA CCN DAII GLAND KDH MDX PERM RICHY SIAM SVH TKS TTL VTE AEONTS BAT-3K CCP DCON GOLD KIAT METCO PF RJH SIM SVOA TM TTTM WG AFC BCPG CGD DCORP GRAMMY KKC MODERN PICO RPC SIMAT SWC TMW TUCC WINNER AHC BDMS CHEWA DRACO GRAND KOOL MPIC PJW RS SIRI T TNDT TWP WORK AIT BEC CHG DSGT GSTEL KTIS NC PL S SLP TACC TNH TWZ WORLD AJ BEM CHUO DTCI GTB KWC NEP PLE S11 SMART TAPAC TNP TYCN WP AJD BGT CIG EARTH GYT KWG NETBAY PMTA SAFARI SMM TC TNPC UAC WR AKR BIG CITY EASON HARN LDC NEW POLAR SALEE SMT TCB TNR UEC YCI ALLA BIZ CK EIC HFT LEE NEWS POMPUI SAM SOLAR TCC TOPP UMI YNP ALT BJC CKP EKH HPT LH NFC POST SAMART SPA TCCC TPAC UMS YUASA AMA BLISS CMO EMC HTECH LIT NOBLE PPM SAMTEL SPG TCJ TPBI UP AMATAV BM CMR EPG HYDRO LOXLEY NOK PRAKIT SAPPE SPORT TCOAT TPCH UPA AMC BOL CNT ESSO IHL LPH NPK PRECHA SAWAD SPVI TFD TPIPL UPF APX BPP COLOR F&D IRCP LST NWR PRIN SAWANG SQ TGPRO TPOLY UPOIC AQ BR COM7 FANCY IT MACO NYT PRO SCI SSC TH TR UT ARIP BRC COMAN FMT ITD MAJOR OHTL PSH SCP SST THANA TRC UTP ARROW BSM CPH FN ITEL MANRIN OISHI PTL SEAFCO STAR THE TRITN UV ASEFA BTC CPR FOCUS JCT MATCH ORI QTC SELIC STEC THIP TRUBB UVAN ASN BTW CRANE FORTH JSP MATI OTO RAM SF STHAI THL TSF VARO ATP30 BUI CSP GENCO JWD MAX PAE RCI SFP STPI TIW TSR VI Source : Thai Institute of Directors Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorised into: • Companies that have declared their intention to join CAC, and • Companies certified by CAC.

The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from thelisted company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, AWS does not confirm, verify, or certify the accuracy andcompleteness of the assessment result.

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Branch Address Phone Fax

Head Office 540 Mercury Tower 7th, 14th, 17th Floor, Ploenchit Road, 0-2680-5000 0-2680-5111 (Mercury Tower) Lumphini, Pathumwan, 10330

191 Silom Complex Building 21st Floor, Room 2, 3-1, Silom Road, Silom 0-2630-3500 0-2630-3530-1 Silom, Bangrak, Bangkok 10500

159 Sermmitr Tower 17th Floor, Room 1703, Sukhumvit 21 Road, Asok 0-2261-1314-21 0-2261-1328 KlongToeyNua, Wattana, Bangkok 10110

7/3 Central Plaza Pinklao Office Tower B 16th Floor, Room 41605- Pinklao 41606 Boromratchchachonnani Road, Arun-Amarin, Bangkoknoi, 0-2884-7333 0-2884-6091 Bangkok 10700

99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Chaengwattana 1 Floor, Room 2204, Chaengwattana Road, Bang Talad, Parkkred, 0-2119-2300 0-2835-3006 Nonthaburi 11120

99/99 Moo 2 Central Plaza Chaengwattana Office Tower, 22nd Chaengwattana 2 Floor, Room 2203, Chaengwattana Road, Bang Talad, Parkkred, 0-2119-2388 0-2119-2399 Nonthaburi 11120

39 Moo 6 Mega Bangna 1st Floor, Room No. 1632/7 Bangna-Trad Mega Bangna 02-106-7345 02-105-2070 Road, Bangkaew, Bangplee, Samutprakarn 10540

59/5 HaHa Shopping Mall, 4th Floor, Room B407-2, Srinakarin Srinakarin 0-2014-2000 0-2014-2001 Road, Nongbon, Pravet, Bangkok 10250

Rayong 356/18 Sukhumvit Road, Nuen-Phra, Muang, Rayong 21000 038-808-200 038-807-200

26/9 2nd Floor, Moo 7, Sri Chan Mai Road, NaiMueng, Mueng, Khonkaen 043-334-700 043-334-799 KhonKhaen 40000

Chonburi 55/22 Moo 1, Samed, Muang, Chonburi 20000 038-053-858 038-784-090

233-232/2 Moo 2 1st Floor, Sukprayoon Road, Na Muang, Chachengsao 038-981-587 038-981-591 MuangChachoengsao 24000

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This Report has been prepared by Asia Wealth Securities Company Limited (”AWS”). The information in here has been obtained from sources believed to be reliable and accurate, but AWS makes no representation as to the accuracy and completeness of such information. AWS does not accept any liability for any loss or damage of any king arising out of the use of such information or opinions in this report. Before making your own independent decision to invest or enter into transaction, investors should study this report carefully and should review information relating. All rights reserved. This report may not be reproduced, distributed or published by any person in any manner for any purpose without permission of AWS. Investment in securities has risks. Investors are advised to consider carefully before making investment decisions.