Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services Buy (from Neutral) Airports of Target Price: THB465.00 Price: THB414.00 Preparing For Take-Off Market Cap: USD16,907m Bloomberg Ticker: AOT TB

We re-initiate coverage on AOT with a BUY (from Neutral) and a Share Data DCF-derived FY17F THB465.00 TP (12% upside). We like AOT as a Thai Avg Daily Turnover (THB/USD) 1,146m/32.3m tourism first-tier investment, based on a strong industry environment in the aviation and tourism sectors. Amid a huge capex cycle, we still expect 52-wk Price low/high (THB) 356 - 422 an unchanged dividend payout based on resilient earnings growth and Free Float (%) 30 strong cash position. Approvals for planned projects may be further Shares outstanding (m) 1,429 catalysts to our long-term forecasts. Estimated Return 12% Leading regional airports operator. We like Airports of Thailand (AOT) as one Shareholders (%) of Asia’s largest airport operators, given the nation’s position as a key regional aviation hub. This was seen in strong growth in aircraft and passenger Ministry of Finance 70.0 movements in 2010-2015 (13-14% CAGR vs peers’ 7%) and could be a Thai NDVR 5.1 foundation for future success. Going forward, we expect Thailand tourism’s State Street Bank Europe Limited 2.0 sound fundamentals, the ASEAN Economic Community (AEC) and further airport expansion projects to provide strong backup and act as earnings Share Performance (%) forecast upsides that can sustain AOT’s longer-term growth. YTD 1m 3m 6m 12m We are positive on the global aviation trend and tourism. Airbus expects Absolute 4.0 4.0 8.7 4.8 9.5 aircraft delivery to grow at a CAGR of 3.6% over the next 20 years, which may Relative 1.8 1.8 3.2 1.3 (11.7) see a tripling in air traffic numbers. We also believe the tourism industry would Source: Bloomberg remain a key player for the local economy (up to 12% of GDP), with continuous growth in foreign visitor numbers to a new high of 35m (+7%YoY) in 2017 alone. Airport of Thailand PCL (AOT TB) Price Close Relative to Stock Exchange of Thailand Index (RHS) Growth support remains the influx of Chinese visitors plus the return of 420 110

European and Russian travellers, as well as the Government’s cut on visa fees 400 102 for 19 countries in January-February. 380 95 360 87

Secured earnings growth. We expect core revenue to expand moderately by 340 79 25 a CAGR of 9% in 2017-2019 based on growth movements in aircraft (7%), 20 passengers (9%) and concessionaires (11%) over this period. Meanwhile, 15 controllable costs may help boost AOT’s bottomline by an average 13% pa, with 10 core profit margins escalating by 1.3-1.6ppts annually. For new projects, we add 5 ’s Phase 2 into our forecasts, which ought to benefit Vol m Apr-16 Oct-16 Jun-16 Feb-16 Dec-16 earnings from 2020. AOT’s remainder projects that have not been confirmed Aug-16 are left as upsides. In the short term, we expect moderate YoY earnings growth in 1Q17 despite the impact of crackdowns on Chinese zero-dollar tours. Source: Bloomberg

Solid balance sheet. A financing plan of 1:1 D/E for THB62.5bn Suvarnabhumi Airport extension phase may keep AOT’s balance sheet strong, ie with a low net D/E of 0.2x over the next three years. Its recurring income business model has Table of contents Financial Exhibits 2 made it a cash-rich company. This has resulted in a massive equity base that is Executive Summary 3 4x larger than its interest-bearing debt. Valuation And Recommendation 6 We re-initiate coverage with BUY. Our DCF-derived THB465.00 TP implies Key Risks 7 30x FY17F P/E, or +1.5SD to its 5-year historical mean. AOT deserves to trade Business Overview 8 at a premium based on a superior outlook in both earnings and ROE vis-à-vis Industry Overview 10 Financial Analysis 13 its peers. The upcoming par split to THB1.00 from THB10.00 may activate

SWOT 17 AOT’s trading liquidity. Downside risks include project delays and political uncertainty. For a detailed analysis of risks, please see page 7.

Forecasts and Valuations Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F Total turnover (THBm) 43,969 50,962 55,393 61,060 66,463 Reported net profit (THBm) 18,729 19,571 21,889 25,080 28,129 Recurring net profit (THBm) 16,554 19,351 21,889 25,080 28,129 Recurring net profit growth (%) 32.0 16.9 13.1 14.6 12.2 Recurring EPS (THB) 11.6 13.5 15.3 17.6 19.7 Analysts DPS (THB) 6.54 6.83 7.64 8.76 9.82 Vatcharut Vacharawongsith Recurring P/E (x) 35.7 30.6 27.0 23.6 21.0 +662 862 9736 P/B (x) 5.48 4.91 4.46 4.03 3.64 P/CF (x) 40.0 29.4 21.5 19.6 17.8 [email protected] Dividend Yield (%) 1.6 1.6 1.8 2.1 2.4 EV/EBITDA (x) 21.3 18.0 16.4 14.9 13.4 Naruedom Mujjalinkool Return on average equity (%) 18.3 17.1 17.3 18.0 18.2 Net debt to equity net cash net cash net cash net cash net cash +662 862 9229 Our vs consensus EPS (adjusted) (%) 0.7 3.1 7.9 [email protected]

Source: Company data, RHB

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Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Financial Exhibits

Financial model updated on: 2017-01-31. Financial summary Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F Asia Recurring EPS (THB) 11.6 13.5 15.3 17.6 19.7 Thailand EPS (THB) 13.1 13.7 15.3 17.6 19.7 Transport DPS (THB) 6.54 6.83 7.64 8.76 9.82 Airports of Thailand BVPS (THB) 76 84 93 103 114 Bloomberg AOT TB Weighted avg adjusted shares (m) 1,429 1,429 1,429 1,429 1,429

Buy Valuation metrics Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F Valuation basis Recurring P/E (x) 35.7 30.6 27.0 23.6 21.0 DCF. P/E (x) 31.6 30.2 27.0 23.6 21.0 P/B (x) 5.48 4.91 4.46 4.03 3.64 Key drivers FCF Yield (%) 1.2 2.8 1.6 0.2 2.9 i. Rising number of aircraft and passengers; Dividend Yield (%) 1.6 1.6 1.8 2.1 2.4 ii. Stronger sales from its duty-free concessions; EV/EBITDA (x) 21.3 18.0 16.4 14.9 13.4 iii. Efficient cost controls. EV/EBIT (x) 27.7 22.7 20.3 17.9 15.9

Key risks Income statement (THBm) Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F i. Limitations to fees and charge hikes; ii. Delays in project investment plans; Total turnover 43,969 50,962 55,393 61,060 66,463 iii. Changes in government policies and political Gross profit 22,514 26,766 29,927 34,223 38,164 uncertainty. EBITDA 26,618 30,759 33,586 37,638 41,344 Depreciation and amortisation (6,188) (6,404) (6,428) (6,468) (6,504) Company Profile Operating profit 20,430 24,355 27,158 31,170 34,840 Airports of Thailand (AOT) is an airports operator in Net interest (1,605) (1,377) (1,456) (1,520) (1,598) the kingdom. Its core tasks are in the management Exceptional income - net 2,706 274 0 0 0 and development of Thailand’s six international airports: Pre-tax profit 23,335 24,424 27,406 31,402 35,219 i. Suvarnabhumi; Taxation (4,585) (4,821) (5,481) (6,280) (7,044) ii. Don Mueang; Minority interests (21) (32) (36) (41) (46) iii. Chiang Mai; Recurring net profit 16,554 19,351 21,889 25,080 28,129 iv. Mae Fah Luang-Chiang Rai; v. Phuket; vi. Hat Yai. Cash flow (THBm) Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F All six serve both domestic and international flights, Change in working capital (3,138) 1,422 (320) (240) (299) with Suvarnabhumi designated as the country's main Cash flow from operations 14,799 20,118 27,451 30,205 33,209 airport terminal. Capex (7,611) (3,326) (18,211) (28,839) (16,072)

Cash flow from investing activities (6,596) (6,754) (17,063) (29,240) (16,876)

Dividends paid (7,057) (7,142) (9,757) (10,920) (12,511) Cash flow from financing activities (12,166) (10,564) (9,744) (4,718) (16,601) Cash at beginning of period 7,049 3,086 5,886 6,530 2,778 Net change in cash (3,963) 2,800 644 (3,752) (269) Ending balance cash 3,086 5,886 6,530 2,778 2,509

Balance sheet (THBm) Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F Total cash and equivalents 48,490 60,490 61,680 59,031 59,888 Tangible fixed assets 95,253 91,692 103,909 126,566 136,487 Intangible assets 553 350 218 278 243 Total investments 9,291 10,981 10,679 10,333 10,015 Total other assets 2,602 5,035 3,887 4,288 5,093 Total assets 159,624 172,216 184,054 204,435 216,026 Short-term debt 4,228 4,797 4,891 4,834 4,824 Total long-term debt 28,202 27,261 25,963 32,283 28,117 Other liabilities 5,605 4,149 5,378 5,292 5,350 Total liabilities 50,812 50,638 50,356 56,551 52,496 Shareholders' equity 107,977 120,406 132,538 146,699 162,317 Minority interests 225 257 244 269 297 Total equity 108,812 121,579 133,698 147,884 163,530 Net debt (16,060) (28,433) (30,827) (21,914) (26,946) Total liabilities & equity 159,624 172,216 184,054 204,435 216,026

Key metrics Sep-15 Sep-16 Sep-17F Sep-18F Sep-19F Revenue growth (%) 17.0 15.9 8.7 10.2 8.8 Recurrent EPS growth (%) 32.0 16.9 13.1 14.6 12.2 Gross margin (%) 51.2 52.5 54.0 56.0 57.4 Operating EBITDA margin (%) 60.5 60.4 60.6 61.6 62.2 Net profit margin (%) 42.6 38.4 39.5 41.1 42.3 Capex/sales (%) 17.3 6.5 32.9 47.2 24.2 Interest cover (x) 12.7 17.7 18.6 20.5 21.8

Source: Company data, RHB

See important disclosures at the end of this report 2

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Executive Summary Thailand’s international airport operator AOT is an airports operator in Thailand. Its core tasks are airport management and the development of the country’s six international airports, namely: i. Suvarnabhumi Airport; ii. Don Mueang International Airport; iii. Chiang Mai International Airport; iv. Mae Fah Luang-Chiang Rai International Airport; v. Phuket International Airport; vi. Hat Yai International Airport. All six of these airports serve both domestic and international flights, with Suvarnabhumi Airport designated as Thailand’s main aviation terminal.

Packed with passengers As seen in Figure 1, the three largest AOT airports – Suvarnabhumi, Don Mueang International and Phuket International – all ran over their current passenger movement capacities in FY16. We believe these airports can still operate in an over-capacity status in terms of passenger numbers, provided that their runways do not exceed their maximum capacity to serve aircrafts. According to management, the current levels of aircraft movements are still manageable. However, AOT has to expand at each of its airports in order to increase the company’s capacity to facilitate handling increasing passenger numbers in the longer term.

Figure 1: AOT’s airport capacity vs utilisation

Aircraft (flights/hour) Passengers (m/year) Airport Actual utilisation Actual utilisation Capacity Capacity FY15 FY16 FY15 FY16 Suvarnabhumi Airport 68 62 63 45 52.38 55.47 Don Mueang International Airport 40 49 54 30 28.59 34.69 Phuket International Airport 20 21 22 12.5 12.54 14.72 Chiang Mai International Airport 24 20 20 8 8.07 9.21 Hat Yai International Airport 18 13 11 2.5 3.57 3.87

Mae Fah Luang-Chiang Rai International Airport 16 8 9 3 1.64 1.96 Note: The actual utilisation number is the first highest hour of annual passenger flow Note 2: The designed capacity of each airport is the 30th highest hour of annual passenger flow Source: Company data

Huge investments ahead AOT is to enter a big investment phase from 2017 onwards as the company has many development project plans – starting from the middle of this year – that are awaiting approvals. Currently, AOT has already undertaken the Suvarnabhumi Airport development project (Suvarnabhumi Airport Phase 2) with the total investment of THB62.5bn (Figure 2). In addition, we expect the Terminal 2 (passengers) and third runway projects for this airport to get their respective approvals this year. We also expect the green light for the upgrading of Don Mueang International Airport’s Terminal 3 to be given in 2017 too. These two airports are the first priority for the company. This is because they are Thailand’s largest airports. As a result, AOT would have at least four projects in its development/expansion pipeline with a total investment of THB143.5bn. We have now added Suvarnabhumi Airport’s Phase 2 into our projections. Phase 2 is conservatively expected to begin operations in 2020. Meanwhile, AOT’s remaining projects are being left as upsides to the company’s long-term valuations.

See important disclosures at the end of this report 3

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Suvarnabhumi Airport. Suvarnabhumi Airport has an annual capacity of 45m passengers. However, Its FY16 passenger movements stood at 55m, ie higher than its current capacity (Figure 1). Therefore, since 2015, AOT began works on Phase 2 with a THB62bn budget. The aim is to increase capacity to 60m passengers annually, which would significantly reduce traveller congestion and increase the number of flights at the airport. This project is slated for completion at end-2019. The works include the Midfield Satellite Building 1, passenger terminal works and improving the airport’s utilities system (Figures 3-4). Moreover, for Suvarnabhumi Airport’s long-term prospects, AOT also has a plan to develop its third runway and Terminal 2 in order to increase passenger capacity by another 30m. Initial estimates have these two projects slated for completion in 2020-2021, with a total project value of THB55bn. Don Mueang International Airport. Similar to Suvarnabhumi Airport, Don Mueang International also faced passenger overcapacity of 35m in FY16 vs its existing 30m capacity. This was despite having completed its development project Phase 2 in 2015. Hence, AOT is studying and improving its master plan by renovating Terminal 3 (passengers) so as to increase passenger capacity to 40m pa. The total budget is about THB26bn. Works on this are slated for completion in 2021. Other airports. Besides its two main airports in the Greater area, AOT intends to develop Phuket International Airport, which is the third most utilised airport in the kingdom. The project value for this is THB6.25bn and the aim is to increase capacity by another 5.5m. Target completion is slated for 2021. Plans to construct a new international terminal at Chiang Mai International Airport – considered a very long-term project – are expected to be completed in 2030.

Figure 2: Airport development projects Investment Completion Additional capacity Airport Description costs (THBbn) year (m passengers) Suvarnabhumi Phase 2 62.5 2019 15

Suvarnabhumi Terminal 2 34.7 2021 30

Third runway 20.3 2020 -

Don Mueang International Terminal 3 26.0 2021 10

Chiang Mai International New international terminal 12.8 2030 12

Phuket International Terminal 3 6.3 2021 5.5

Source: Company data

Figure 3: Planned Midfield Satellite Building 1 at Figure 4: Planned passenger terminals at Suvarnabhumi Suvarnabhumi Airport Airport

Source: Company Source: Company

See important disclosures at the end of this report 4

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Leading traffic growth in the region As seen in Figure 5, as at 2015, AOT posted the highest passenger growth vs its regional peers. The company has booked an aggressive 5-year growth CAGR of 13-14% and – in FY16 – it posted a 12% YoY rise in passenger movements to 119.9m trips.

Airport expansions as key earnings growth support AOT has undertaken aggressive expansions at various airports previously, namely Don Mueang International and Phuket International’s Terminal 2 and Phase 2 respectively. It also has future expansions in the pipeline for: i. Suvarnabhumi Airport Phase 2; ii. Don Mueang International Airport Terminal 3; iii. Phuket International Airport’s Terminal 3. These ought to help the company increase its passenger capacity in order to efficiently facilitate more travellers. Moreover, the area expansion at these airports would also increase their concession areas, which would generate more revenue for AOT.

Duty-free concessionaire expiry paves way for further upside The 20-year concession for duty-free shop operations at Suvarnabhumi Airport that had earlier been granted to the King Power International Group – is set to expire in 2020. After this, AOT is to open bids for a new contract. We believe the company would gain better benefits from the new contract. This is because there are more competitors out there that wish to land this concessionaire deal. Note that we have not yet included this factor into our forecasts. Hence, it provides a hidden upside to our TP.

Figure 5: AOT’s airport passenger movements vs regional peers Jan-Dec Passenger movement (m) Passenger movement growth 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Airports of Thailand 66.4 75.1 88.3 90.5 109.8 14% 13% 18% 3% 21% Malaysia Airports Holdings (ex-IST SGIA) 64.0 67.2 79.6 83.3 83.7 11% 5% 18% 5% 0% Beijing Capital International Airport 78.7 81.9 83.7 86.1 89.9 6% 4% 2% 3% 4% Shenzhen Airport 28.2 29.6 32.3 36.3 39.7 6% 5% 9% 12% 10% Shanghai International Airport 74.6 78.7 82.8 89.7 99.2 4% 6% 5% 8% 11% Xiamen International Airport 15.8 17.4 19.8 20.9 20.8 19% 10% 14% 6% 0% Japan Airport Terminal (HND) 62.6 66.7 68.6 72.7 75.3 -3% 7% 3% 6% 3% Changi Airport Group 46.5 51.2 53.7 54.1 55.5 11% 10% 5% 1% 2% Hong Kong International Airport 53.9 56.5 59.9 63.3 68.5 6% 5% 6% 6% 8% Source: Companies data, RHB

Figure 6: AOT’s aircraft movements vs regional peers Jan-Dec Aircraft movement ('000) Aircraft movement growth 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Airports of Thailand 449 499 582 624 728 14% 11% 17% 7% 17% Malaysia Airports Holdings (ex-IST SGIA) 632 646 738 792 814 9% 2% 14% 7% 3% Beijing Capital International Airport 533 557 568 582 590 3% 5% 2% 3% 1% Shenzhen Airport 224 240 257 286 305 3% 7% 7% 11% 7% Shanghai International Airport 574 597 615 655 706 4% 4% 3% 7% 8% Xiamen International Airport 136 146 167 174 180 16% 8% 14% 4% 3% Japan Airport Terminal (HND) 380 391 403 426 439 11% 3% 3% 6% 3% Changi Airport Group 302 325 344 341 346 14% 8% 6% -1% 1% Hong Kong International Airport 334 352 372 391 406 9% 5% 6% 5% 4% Source: Companies data, RHB

See important disclosures at the end of this report 5

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Valuation And Recommendation We re-initiate coverage on AOT by upgrading our previous recommendation to BUY (from Neutral) with a new THB465.00 TP. We believe the company’s solid fundamentals – in terms of our estimate of double-digit EPS growth for FY17-19 – should be a strong backup for investments. We expect 1Q17 earnings to post moderate YoY and QoQ growth, given that the impact of weak Chinese visitor numbers – with regards to the crackdown on zero-dollar tours – may prove limited. This is thanks to the return of Russian tourists as well as the popularity of domestic air travel, which has remained strong. This may imply that the situation is bottoming out and could act as a near-term catalyst for this counter. We use the DCF to come up with our TP. This is premised on a WACC of 8% and TG of 3%, which implies to 30x FY17F P/E. We believe that AOT deserves to trade at a premium, as it has a near monopoly in terms of airport operations in Thailand. Its assets contribute more than 80%of total aircraft traffic and passenger movements in the kingdom. As seen in Figure 8, with FY17F P/E of 26x and a dividend yield of 1.9%, currently AOT is comparable to its peers’ average of 27.2x and 1.8% respectively. While AOT has the highest ROEs vis-à-vis its regional counterparts, the company also had a stable dividend payout ratio of not less than 40% of its earnings over the past five years. We are assuming a payout ratio of 50% going forward. This is based on the ratio that it paid in the last two years, which reflects a dividend yield of about 2%.

Figure 7: AOT’s DCF valuation THBm 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025 2026F EBIT 28,863 32,922 36,817 39,791 44,740 49,232 52,518 54,852 56,612 58,300 EBIT (1-t) 23,090 26,338 29,454 31,833 35,792 39,385 42,015 43,881 45,290 46,640 Depreciation & Amortization 6,428 6,468 6,504 8,779 8,870 8,928 9,014 9,130 9,310 9,590 Net working capital (866) (1,343) (1,424) (1,323) (1,474) (1,492) (1,438) (1,428) (1,425) (1,446) Capex (17,700) (28,700) (16,000) (5,000) (2,500) (2,000) (2,000) (3,500) (5,000) (8,000) Net free cash flow to firm 10,952 2,763 18,533 34,289 40,688 44,821 47,590 48,083 48,174 46,785

Terminal value 978,328 PV 10,541 2,463 15,305 26,228 28,829 29,417 28,933 27,078 25,130 495,324 Terminal growth 3.0% WACC 8.0% Total discounted firm value 689,248 Less: Net debt 24,323 Less: Minority interest 244 Equity value 664,680 Number of shares (m) 1,429 Equity value per share (THB) 465.00 Source: RHB

Figure 8: Regional peers comparison Market Transport Cap Ticker P/E (x) P/BV (x) Div. yield (%) ROE (%) EPS growth (%) Company USDm 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F Airports of Thailand 16,800 AOT TB 26.0 22.7 4.3 3.9 1.9 2.2 17.3 18.0 11.8 14.6 Malaysia Airports Hldgs 2,314 MAHB MK 51.1 30.9 1.3 1.2 1.8 2.3 2.2 3.8 *157.4 *65.3 Beijing Capital Int. 4,210 694 HK 14.2 13.0 1.4 1.3 2.9 3.2 10.2 10.3 11.3 8.7 Shenzhen Airport 2,408 000089 CH 22.6 19.7 1.5 1.4 1.0 1.1 6.4 6.9 21.8 14.8 Shanghai International 7,682 600009 CH 16.7 15.1 2.2 2.0 1.8 1.8 13.3 13.3 12.6 10.5 Xiamen International 972 600897 CH 15.1 14.2 1.8 1.5 2.0 2.2 12.0 11.0 7.2 6.1 Japan Airport Terminal 3,011 9706 JP 43.4 36.3 2.7 2.6 0.9 0.9 6.5 7.6 -20.1 19.5

Average (ex-AOT TB) 27.2 21.5 1.8 1.7 1.7 1.9 8.4 8.8 6.6 11.9 Note: *Excludes Malaysia Airport’s data in terms of average EPS growth Data as of 25 January 2017 Source: Bloomberg, RHB

See important disclosures at the end of this report 6

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Figure 9: AOT’s P/E band Figure 10: AOT’s P/E and SD levels Price (THB) P/E (x) 35 AIRPORTS OF THAILAND 700 +2 SD: 32.0x 40 30 +1 SD: 27.1x 600 35 25 Mean: 22.2x 500 30 20 25 400 15 -1 SD: 17.3x 20 300 15 10 -2 SD: 12.4x

200 10 5

100 0

0 Jul-15 Jul-16 Jul-12 Jul-13 Jul-14 Oct-14 Oct-15 Oct-12 Oct-13 Oct-16 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 F Sep-18F Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Source: RHB Source: Bloomberg, RHB

Risks The risks to our call are: i. Limitations on fee and charge hikes. AOT cannot independently raise fees and charges. These fees and charges are landing and parking fees, passenger charges, aircraft service charges and revenue contributions from concession contracts. Such increases must be granted by the related authorities and/or the Government. This is because airports are deemed as public infrastructure. As a result, any proposed hike may take time and the company’s earnings growth may be heavily dependent on a rise in traffic; ii. Delays in project investment plans. Delays are frequent in public projects. A large number of participants and numerous processes may result in some postponements. Other factors that can delay project investment plans include slow issuances of government permits, inappropriate land expropriation, rejection of the environmental impact assessment (EIA), opposition by locals impacted by a project’s implementation, delayed renewal of contracts/concessions, and unexpected incidents; iii. Changes in government policies and political uncertainties. Each newly-elected government can make changes to administrative policies. This includes decisions on state projects initiated by a previous administration, as well as a reshuffling in state enterprise boards and management teams. Such moves may disrupt the continuity of operations and affect income generation amongst the affected agencies. Domestic political uncertainties could also be a risk to public infrastructure works as well. For example, the closure of Suvarnabhumi Airport in 2008 by the People’s Alliance for Democracy (popularly known as the “Yellow Shirts”), which resulted in the suspension of the country’s air transport system and the undermining of tourism sentiment; iv. Declining Chinese tourist numbers. Since Chinese visitors contribute the highest proportion of foreign tourists to Thailand (27% on average), a fall in the number of Chinese travellers may negatively affect the service income of AOT’s airports as well as revenue sharing from the duty-free concessionaires. An example of this was the recent crackdown by the Government on zero-dollar tours. However, we see the matter as a short-term issue, given that the current administration is undertaking various initiatives to speed up the improvements to the quality of Thai tourism. In FY17, though, this may result in a limited downside risk of less than 2% to AOT’s topline and less than 3% to bottomline, according to our estimates; v. Natural disasters. Extreme weather conditions and natural disasters may result in the discontinuation of flight operations, which is negative to the collection of fees and charges. Thankfully, however, most of these incidents are temporary in nature and occur only for a short period of time.

See important disclosures at the end of this report 7

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Business Overview As an airport business operator in Thailand, AOT’s core tasks are the management and development of the country’s six international airports, namely: i. Suvarnabhumi; ii. Don Mueang International; iii. Chiang Mai International; iv. Phuket International; v. Hat Yai International; vi. Mae Fah Luang-Chiang Rai International. Suvarnabhumi is the largest airport in Thailand, and has the capacity to serve 76 flights per hour and accommodate 45m passengers annually. The second-largest airport is Don Mueang International. It can serve up to 40 flights per hour and accommodate 30m passengers per year. All six of AOT’s airports serve both domestic and international flights, with Suvarnabhumi designated as Thailand’s main airport. The company’s assets contribute more than 80% of Thailand’s total aircraft traffic on average.

Figure 11: AOT’s aircraft movements by fiscal year Figure 12: AOT’s passenger movements by fiscal year

Source: Company data Source: Company data

AOT has two major sources of revenue: i. Aeronautical (57% of total topline); ii. Non-aeronautical (43% of total revenue). The aeronautical revenue is relevant to air traffic movement charges, ie landing and parking, as well as passenger and aircraft services. The non-aeronautical revenue is indirectly relevant to air traffic movements and includes office and state property rental fees, and services and concession revenues.

Aeronautical revenue Landing and parking charges. These changes are based on the maximum permissible take-off weight as specified in the flight manual. Passenger service charge (PSC). PSC represents the highest revenue contribution to the company. It was formerly known as “airport tax” and is paid by passengers departing from an airport. The PSC is collected by the airlines upon the purchase of tickets and is only paid to AOT upon completion of the flight. Currently, the charges for international flights are THB700.00, while domestic flights are charged THB100.00. Aircraft service charges. These are fees are paid by the airlines for the use of an airport’s boarding bridges. They vary by the maximum take-off weight of the aircraft and the length of time it is parked at a gate.

See important disclosures at the end of this report 8

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Figure 13: AOT’s FY16 revenue structure Figure 14: AOT’s FY16 cost structure

Source: Company data Source: Company data

Non-aeronautical revenue Office and state property rental fees. Rental tenants include airlines, government agencies and airport concessionaires. Rental rates are determined based on the tenants’ business use at each of AOT’s airports. Services revenue. This varies by the activities undertaken. Such activities include: i. Utilities; ii. Check-in counter services; iii. Airline announcement services; iv. Hydrant systems services; v. Advanced passenger processing systems (APPS)... …amongst many others. Concession revenue. This segment represents the second-highest revenue contributor to AOT’s topline. It varies by activities and includes: i. Duty-free services provided by King Power International – the only duty-free store in Thailand; ii. Souvenir shops; iii. Food & beverage outlets; iv. Airline catering services; v. Fuelling services; vi. Car park services; vii. Advertising; viii. Banking services... …and more. On the other hand, on the cost side, the highest cost contributors to AOT are: i. Depreciation & amortisation expenses; ii. Employee benefit expenses; iii. Outsourcing expenses. Most of the company’s costs are fixed, eg depreciation & amortisation, utilities, repairs and maintenance, and rental expenses. AOT has set an internal target to control its costs so that they do not grow by more than 7% pa.

See important disclosures at the end of this report 9

Airports of Thailand Thailand Re-Initiating Coverage

1 February 2017 Transport | Airport Services

Figure 15: King Power International’s duty-free store at Figure 16: King Power International’s duty-free store at Suvarnabhumi Airport Suvarnabhumi Airport

Source: King Power International Source: King Power International

Industry Overview Enormous room for growth for the air transportation industry The long-term outlook of the air transportation industry seems to be sustainable. This is based on the shift in the number of middle-income earners around the globe – particularly in emerging nations – that may boost the demand for air travel for both business and leisure. This has resulted in the fast-growing low-cost aviation business. Based on aircraft manufacturer Airbus’ forecasts, it is likely that the Asia-Pacific region would see the strongest growth, with traffic numbers possibly tripling by 2035. Throngs of new aircraft are slated for delivery and would be added to airline fleets globally at an average annualised growth rate of 3.6% over the next 20 years. Most of them, according to Airbus, are single-aisle planes that could probably serve flights within the region. As Thailand has become one of South-East Asia’s most important air transportation gateways – and one of the world’s leading vacation destinations – we therefore believe the demand for outbound travel would be strong enough to support the expansion of AOT’s businesses. Note that the International Civil Aviation Organisation (ICAO) – the United Nations (UN) agency that codifies the principles and techniques of international air navigation among others – red flagged Thailand in 2015. In the same year, the US Federal Aviation Administration (FAA) downgraded the country to Category 2 status. These downgrade disallow Thai carriers from adding new flights to the US, Japan and Taiwan. While there has been no change in ICAO and the FAA's stances on Thailand, we believe that the growth rate in international flights is to come from China, Russia and Europe as a whole. These are areas where the sizes of their populations are massive, which could potentially sustain Thailand’s tourism industry, in our view.

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Figure 17: The middle-income segment may expand strongly over the next 20 years

Note: *Households with yearly income between USD20,000-150,000 at PPP in constant 2015 prices Note 2: **Estimate for 1995 split by region Source: Oxford Economics, Airbus

Figure 18: Rising air traffic to sustain departure growth

Source: International Civil Organisation (ICAO), Airbus

Figure 19: Asia-Pacific may lead the world in air traffic increases

Source: Airbus

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Figure 20: Departure numbers of key feeder markets Figure 21: Strong demand for aircraft with the doubling of fleet numbers (m) China USA Russia Europe* 300

243 247 250 235 238 240 227 231 228 232 233

200

150 135 116 98 100 83 70 68 73 64 64 64 61 60 62 58 61 46 48 50 35 41 57 51 44 50 50 37 39 42 29 34 34 0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Note: *18 European countries that have available information Source: Airbus Source: World Bank, China Outbound Tourism Research Institute, RHB

Growth bolstered by the strong number of departures from China The number of departures could be bolstered by Chinese visitors, whose numbers still have significant room to grow. There were 135m tourists from Mainland China in 2015, ie 10% of the total population of around 1.38bn. By comparison, other leading nations’ departures accounted for up to 20% of total residents each year.

Thailand as a world-class destination Thailand is the one of the most popular tourist destinations in South-East Asia. It is a country blessed with lots of tourist attractions. The kingdom’s tourism industry accounted for 11.6% of GDP in 2016 and constantly plays an important role for the nation’s economy. Thailand’s strength lies in its: i. Geographical location; ii. Distinguished culture; iii. Wealth of natural attractions. The number of tourist arrivals to the “Land Of Smiles” (to give Thailand its tourism promotions catchphrase) has increased continuously, with a 14-year CAGR of 8% (2001- 2015). A recent survey conducted by MasterCard Worldwide showed that Thailand’s capital city, Bangkok, was ranked first in terms of top global city destinations in 2016. The uncertain global economic conditions may benefit Thailand, in our view. This is because the country is known as a value-for-money destination when compared with other luxury travel destinations like the Maldives.

Figure 22: Global Destination Cities Index 2016 Top 10 – Bangkok is ranked first 2016 Destination International overnight 2016 Purpose of visit Expenditure breakdown at destination (%) Peak months for rank city visitors (2016) visitor spend Business Leisure Accom- Food & Shopping Local Local Misc. visiting number (m) % growth YoY (USDbn) (% ) (% ) modation Beverages Transport Services 1 Bangkok 21.5 9.6 14.8 14.4 85.6 26.0 19.4 21.7 9.9 20.8 2.2 April, January 2 London 19.9 7.0 19.8 20.9 79.1 30.1 16.5 46.7 4.3 1.9 0.5 July-August 3 Paris 18.0 2.1 12.9 29.7 70.3 44.8 23.6 16.7 6.6 8.3 0.0 December, March-May 4 Dubai 15.3 7.5 31.3 20.0 80.0 27.0 15.0 31.0 9.0 18.0 0.0 December-January 5 New York 12.8 3.1 18.5 13.6 86.4 29.1 18.9 24.7 11.4 13.1 2.7 July-August 6 Singapore 12.1 4.1 12.5 22.7 77.3 29.0 12.3 22.5 4.5 31.8 0.0 December, July-August 7 Kuala Lumpur 12.0 7.4 11.3 26.8 73.2 30.8 16.0 30.7 12.8 7.0 2.7 December-January, March, July 8 Istanbul 12.0 0.3 7.5 9.2 90.8 20.4 30.8 24.6 11.0 7.1 6.1 June-September 9 Tokyo 11.7 12.2 13.5 27.5 72.5 28.2 20.3 43.1 6.9 1.4 0.3 April, October, July 10 Seoul 10.2 10.2 12.3 16.3 83.7 24.1 9.8 58.7 2.7 2.8 1.8 December-January, October Source: MasterCard Worldwide

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Solid tourism outlook to remain intact in FY17 We maintain our positive view on the Thai hospitality sector this year. The tourism situation may normalise after the 100-day national mourning period – to honour the passing of King Bhumibol Adulyadej – ends in mid-January. An influx of foreign travellers should continue and be driven by quality Chinese tourists, as well as visitors from other East Asian markets such as Japan, South Korea, and Taiwan. The return of Russian and other European tourists is also expected to underpin visitor arrival numbers. The new terminals at Don Mueang International Airport in Bangkok and the Phuket International Airport should be able to facilitate the higher passenger flows. This is given the fact that their maximum capacities were enhanced by 62% (Don Mueang International Airport) and 92% (Phuket International Airport) last year. The crackdown on Chinese zero-dollar tours could undermine the foreign visitor numbers, but in the short term only, in our view. Although Chinese tourist inbounds accounted for 27% of total arrivals in 2016 (32.6m), the majority of them (c.80%) are independent travellers and luxury tours. To cope with this matter, related Thai authorities are on the move to promote quality tourism among the Chinese public. This includes initiatives like roadshows. As a result, we expect some Chinese visitors to seek legal tour operators instead of taking up zero-dollar options. The impact of all this to our 2017 forecast numbers would be limited to 3% of total arrivals. Thus, we revise down the number of foreign visitors this year to 35m (+7% YoY) from 36m previously and bring tourism income to 12% of GDP (2016F: 11.6%). Chinese travellers are likely to make up 29% of the total visitor numbers, or 10m (+14% YoY), in our view.

Figure 23: Foreign visitors to Thailand and tourism income Figure 24: Contributions of Chinese tourists to Thailand and growth rate Tourist arrivals (m) Foreign tourist income (THBbn) - RHS Contribution of Chinese tourists to total arrivals Chinese tourist growth (%YoY) - RHS 40 2,000 30% 28.6 80% 26.6 26.9 35.0 1,800 35 32.6 25% 60% 29.9 1,600 30 26.7 24.8 1,400 20% 18.7 40% 25 22.4 1,200 17.6 19.2 20 1,000 15% 20% 15.9 12.5 13.814.514.614.1 800 15 11.7 10.8 11.5 9.0 10.1 10.0 600 10% 8.0 0% 7.4 7.5 6.9 7.0 10 6.3 6.6 6.4 400 6.1 5.5 5 200 5% -20% 0 0 0% -40% 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017F 2017F Source: Department of Tourism, RHB Source: Department of Tourism, RHB

Financial Analysis A secured earnings growth AOT’s combined core revenue rose 15% YoY in 2016 due to the full-year operations of Bangkok’s Don Mueang International Airport’s Terminal 2 and the opening of Phuket International Airport’s Phase 2 in Aug 2016. This led to a solid growth of 12% in flights, and passenger charges and service fees. At the same time, an influx of international passengers resulted in concession income from the duty-free shopping business rising by 16%. Nonetheless, we expect AOT’s core revenue to grow moderately by a CAGR of 9% in 2017-2019. There are several factors that support this analysis. Firstly, we estimate a 7% pa increase in the number of aircraft flights during this period. This would be mainly driven by 9% and 5% rises in domestic and international flights respectively.

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Other major supporting factors are: i. The expansions at Don Mueang International and Phuket International; ii. An expected increase in flight services from domestic destinations, China and Russia; iii. The planned delivery of six new single-aisle aircraft pa for Thai AirAsia, as well as other aeroplanes ordered by the other local carriers. Secondly, we opine for an annualised expansion of total passenger numbers by 9%. This is following the boom in tourism in Thailand as well as low-cost aviation. In 2017, we estimate domestic passenger numbers to grow by 10%, outpacing international numbers (+7%). A higher surcharge for international flights – by 6x – ought to keep passenger service fees growing at a favourable 8%. We expect the improving Chinese and Russian markets to ramp up overseas flights and, consequently, accelerate revenue from passenger charges by 10% in 2018. Thirdly, we estimate a growth CAGR of 11% during this period from AOT’s duty-free business. Major supporting factors for this would come from the: i. Spending power of Chinese travellers; ii. Improving local consumption that may improve the spending of local travellers; iii. Escalation of revenue sharing by 1% pa until the maximum 20% of topline sales in 2018. In terms of revenue breakdown, passenger service charges are the highest contributor to AOT’s topline, at 42-43% on average. However, we expect to see gradual increase in concession revenue contributions in the 27-28% range by the next three years. Excluding depreciation & amortization expenses, we assume the cost of services to increase by 7%, ie at the same level as management’s guidance. This may fortify overall GPM/EBITDA margins to 57% (2016: 53%) and 65% (2016: 63%) respectively in 2019. Based on these forecasts, we still believe that AOT would continue to post new highs in earnings, with a 3-year average earnings growth of 13% to THB28.1bn in 2019 and NPMs going up by 1.1-1.6ppts pa. Our conservative consumption levels assign AOT to operate Phase 2 of Suvarnabhumi Airport in 2020. Although its depreciation expenses for the year may jump by one-third, we expect the core revenue growth to accelerate to 10% to curb rising costs and keep its EBITDA growing by 12%.

Figure 25: AOT’s revenue outlook by fiscal year Figure 26: AOT’s expenses outlook by fiscal year Landing & parking Passenger service Employee benefit Utilities Outsourcing (THBm) Aircraft service Office and state property rents (THBm) Service revenues Concession revenues Repairs & maintenance State property rental Depre. and amort. 70,000 66,463 30,000 28,299 26,838 61,060 25,466 60,000 24,196 55,393 28% 25,000 23% 24% 50,962 28% 21,455 25% 50,000 19,916 26% 43,969 27% 20,000 18,959 10% 27% 12% 17,505 9% 29% 9% 40,000 37,585 12% 28% 11% 36,810 27% 25% 9% 11% 12% 10% 12% 15,000 27% 30,405 25% 26% 9% 10% 10% 8% 8% 20% 30,000 7% 10% 20% 23% 11% 11% 12% 19% 10% 13% 19% 43% 10,000 15% 11% 43% 15% 14% 11% 20,000 43% 11% 43% 14% 11% 11% 45% 13% 12% 45% 43% 12% 13% 10,000 43% 5,000 25% 25% 26% 28% 25% 26% 25% 13% 26% 16% 13% 14% 13% 13% 13% 13% 0 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2012 2013 2014 2015 2016 2017F 2018F 2019F

Source: Company data, RHB Source: Company data, RHB

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Figure 27: AOT’s key assumptions by fiscal year 2012 2013 2014 2015 2016 2017F 2018F 2019F International flights ('000) 269 317 325 365 374 385 405 429 % growth 8% 18% 3% 12% 2% 3% 5% 6% Domestic flights ('000) 212 243 285 342 403 443 487 521 % growth 10% 15% 17% 20% 18% 10% 10% 7% Average landing & parking charges (THB/flight) 19,804 17,022 17,452 16,243 16,561 16,892 17,230 17,575

International flight passengers (m) 44.3 54.3 51.2 61.3 68.1 72.6 79.6 86.1 % growth 5.2% 22.4% -5.7% 19.8% 11.0% 6.7% 9.6% 8.2% Domestic flight passengers (m) 27.2 31.9 36.4 45.5 51.9 57.3 62.8 67.9 % growth 12.5% 17.2% 14.1% 24.9% 14.1% 10.5% 9.6% 8.2% Passenger service charge - international (THB/person) 700 700 700 700 700 700 700 700 Passenger service charge - domestic (THB/person) 100 100 100 100 100 100 100 100

Gross profit margin 42.4% 48.5% 47.0% 51.2% 52.5% 54.0% 56.0% 57.4% EBITDA margin 56.5% 58.6% 60.6% 64.0% 63.0% 63.7% 64.5% 65.2% Net profit margin 21.4% 44.4% 32.5% 42.6% 38.4% 39.5% 41.1% 42.3% Source: Company data, RHB

Strong balance sheet remains despite massive investments Investments in the second phase of Suvarnabhumi Airport may significantly enlarge AOT’s capex to THB17.7bn/THB28.7bn/THB16bn in 2017F-2019F respectively vs THB2.7bn in 2016. Having a financing plan with a 1:1 D/E ratio for the project, we expect the company’s balance sheet to remain strong with relatively low net D/E of 0.2x throughout the next three years. This is thanks to its recurring income business model, which has: i. Strengthened AOT’s operating cash flows; ii. Generated a net cash position (cash on hand plus short-term investments) with huge excess cash of about THB60bn, or almost 35% of its total assets. This has resulted in a massive equity base, ie 4x larger than its interest-bearing debt. Such a financial condition ought to help AOT to smoothly finance its future projects.

Figure 28: AOT’s balance sheet and cash flow profiles Figure 29: Construction of Suvarnabhumi Airport’s Phase 2 in mid-January (THBm) Capex Operating cash flow Net D/E ratio - RHS (x) 35,000 33,209 0.8 30,205 30,000 28,839 0.7 27,451 0.6 25,000

20,025 20,118 0.5 20,000 18,211 16,128 16,072 0.4 14,799 15,000 0.3 10,000 8,298 9,080 7,611 0.2 3,872 5,000 3,305 3,326 0.1

0 0.0 2012 2013 2014 2015 2016 2017F 2018F 2019F

Source: Company data, RHB Source: RHB

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Moderate results expected for 1Q17 The Thai tourism scenario was softer in Oct-Dec 2016 despite this typically being the high period. This is likely due to the effect of the crackdown on Chinese zero-dollar tours. During this time, we saw modest growth of 2% in terms of international flights and 2% for international passengers. However, this period also saw domestic air travel remaining solid, with a 12% and 11% growth in aircraft and passenger movements. A possible reason was the rise in traffic flows as Thai citizens nationwide travelled to Bangkok to pay their respects to the late King Bhumibol (who was also known as King Rama IX) at the Grand Palace. Whatever the reasons, total aircraft and passenger movements increased 7% and 6%, respectively over this 3-month period. This ought to cause AOT’s 1Q17 earnings to grow moderately both YoY and QoQ. However, we believe the international air travel to Thailand bottomed out in Nov 2016 in terms of both aircrafts and passengers, and is set to improve in the following quarters. This is given the lifting of entertainment restrictions put in place during the mourning period and the Government’s action to slash visa fees for foreign tourists – including those from China – during the 1 Dec 2016-28 Feb 2017 period. This may attract visitors in the short term.

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SWOT Analysis

• A natural monopoly business • Political crises could dampen • Solid stream of recurring income from services tourist arrivals • Favourable concession agreement • As a state • Thailand as one of major air transport and tourism enterprise, hubs in South-East Asia decision-making may be slow due to dependency on government approvals • Continuous growth in visitor flows from China and the ASEAN Economic Community (AEC) • Airport expansion is likely to boost retail revenue • Automated airport systems/services may allow an increase in the commercialised • Unable to maximise its revenue generation space substantially in the non-aeronautical segment, as it does not manage its own duty-free shops

• Higher-than-expected capex could be detrimental to cash flow

Recommendation Chart

Date Recommendation Target Price Price Price Close 2015-11-30 Neutral 304 311 464 Recommendations & Target Price 2015-08-17 Neutral 287 287 97 na 104 120 153 222 249 148 226 243 287 304 414 245 229 2014-12-01 Take Profit 251 284

364 133 188 170 251 2014-10-31 Neutral 229 242 314 2014-08-14 Buy 245 214 137 264 2014-05-15 Buy 243 193 214 2014-05-15 Buy 243 193 164 2014-03-04 Buy 226 199 114 2014-02-18 Neutral 170 187 2014-01-22 Neutral 148 160 64 14 Buy Neutral Sell Trading Buy Take Profit Not Rated Source: RHB, Bloomberg Feb-12 May-13 Aug-14 Nov-15

Source: RHB, Bloomberg

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RHB Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage

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OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST

Malaysia RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for: a) -

RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for: a) -

RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the last 12 months except for: a) -

RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for: a) -

20

Airports of Thailand Thailand Initiating Coverage

Transport | Airport Services

Thailand RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions.

Indonesia PT RHB Securities Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above.

Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows:

1. Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically;

2. Affiliation between parties to the employees, Directors or Commissioners of the parties concerned;

3. Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same;

4. Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company;

5. Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or

6. Affiliation between the Company and the main Shareholders.

PT RHB Securities Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law.

Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b. a substantial shareholder of an Issuer or Public Company; c. an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to inside information; and d. an individual who within the last six months was a Person defined in letters a, b or c, above.

Singapore RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) -

The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) -

RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) -

Hong Kong RHBSHK or any of its group companies may have financial interests in in relation to an issuer or a new listing applicant (as the case may be) the securities in respect of which are reviewed in the report, and such interests aggregate to an amount equal to or more than (a) 1% of the subject company’s market capitalization (in the case of an issuer as defined under paragraph 16 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct”); and/or (b) an amount equal to or more than 1% of the subject company’s issued share capital, or issued units, as applicable (in the case of a new listing applicant as defined in the Code of Conduct). Further, the analysts named in this report or their associates may have financial interests in relation to an issuer or a new listing applicant (as the case may be) in the securities which are reviewed in the report.

21

Airports of Thailand Thailand Initiating Coverage

Transport | Airport Services

RHBSHK or any of its group companies may make a market in the securities covered by this report. RHBSHK or any of its group companies may have analysts or their associates, individual(s) employed by or associated with RHBSHK or any of its group companies serving as an officer of the company or any of the companies covered by this report. RHBSHK or any of its group companies may have received compensation or a mandate for investment banking services to the company or any of the companies covered by this report within the past 12 months.

Note: The reference to “group companies” above refers to a group company of RHBSHK that carries on a business in Hong Kong in (a) investment banking; (b) proprietary trading or market making; or (c) agency broking, in relation to securities listed or traded on The Stock Exchange of Hong Kong Limited.

Kuala Lumpur Hong Kong Singapore

RHB Research Institute Sdn Bhd RHB Securities Hong Kong Ltd. RHB Research Institute Singapore Level 3A, Tower One, RHB Centre 12th Floor Pte Ltd. Jalan Tun Razak World-Wide House 10 Collyer Quay Kuala Lumpur 50400 19 Des Voeux Road #09-08 Ocean Financial Centre Malaysia Central, Hong Kong Singapore 049315 Tel : +(60) 3 9280 8888 Tel : +(852) 2525 1118 Tel : +(65) 6533 1818 Fax : +(60) 3 9200 2216 Fax : +(852) 2810 0908 Fax : +(65) 6532 6211

Jakarta Shanghai Bangkok

PT RHB Securities Indonesia RHB (China) Investment Advisory Co. Ltd. RHB Securities (Thailand) PCL Wisma Mulia, 20th Floor Suite 4005, CITIC Square 10th Floor, Sathorn Square Office Tower Jl. Jenderal Gatot Subroto No. 42 1168 Nanjing West Road 98, North Sathorn Road, Silom Jakarta 12710, Indonesia Shanghai 20041 Bangrak, Bangkok 10500 Tel : +(6221) 2783 0888 China Thailand Fax : +(6221) 2783 0777 Tel : +(8621) 6288 9611 Tel: +(66) 2 862 9999 Fax : +(8621) 6288 9633 Fax : +(66) 2 862 9799

22

Thai Institute of Directors Association (IOD) – Corporate Governance Report Rating 2016

Excellent CG Scoring AMATA BTS DELTA EGCO INTUCH KTB MINT PPS QTC SCB SNC THCOM TSC AOT BWG DEMCO GFPT IRPC KTC MONO PS RATCH SCC SPALI TISCO TTCL BAFS CK DRT GPSC IVL LHBANK NKI PSL SAMART SCCC SSSC TKT TU BAY CPF DTAC GRAMMY KBANK LPN NYT PTT SAMTEL SE-ED STEC TMB UV BCP CPN DTC HANA KCE MBK OTO PTTEP SAT SIM SVI TNDT VGI BIGC CSL EASTW HMPRO KKP MCOT PHOL QH SC SITHAI TCAP TOP WACOAL WAVE

Very Good CG Scoring 2S ASIMAR CGH ERW IRC MFC PCSGH Q-CON SMK SYNTEC TIPCO TSR AAV ASK CHG FORTH JSP MOONG PDI RICHY SMPC TAE TK TSTE ACAP ASP CHO FPI K MSC PE ROBINS SMT TAKUNI TKS TSTH ADVANC AUCT CHOW GBX KSL MTI PG RS SNP TASCO TMC TTA AGE AYUD CI GC KTIS MTLS PJW RWI SPI TBSP TMI TTW AH BANPU CIMBT GCAP L&E NCH PLANB S SPPT TCC TMILL TVD AHC BBL CKP GL LANNA NOBLE PM S & J SPRC TF TMT TVO AKP BDMS CM GLOBAL LH NSI PPP SABINA SR TFI TNITY TWPC ALUCON BEM CNS GLOW LHK NTV PR SALEE SSF TGCI TNL UAC AMANAH BFIT CNT GUNKUL LIT OCC PRANDA SAMCO SST THAI TOG UP ANAN BLA COL HOTPOT M OGC PREB SCG STA THANA TPC UPF AP BOL CPI HYDRO MACO OISHI PRG SEAFCO SUSCO THANI TPCORP VIH APCO BROOK DCC ICC MALEE ORI PRINC SFP SUTHA THIP TRC VNT APCS CEN EA ICHI MBKET PACE PT SIAM SWC THRE TRU WINNER ARIP CENTEL ECF IFEC MC PAP PTG SINGER SYMC THREL TRUE YUASA ASIA CFRESH EE INET MEGA PB PYLON SIS SYNEX TICON TSE ZMICO

Good CG Scoring AEC BA CHARAN EARTH GIFT ITD LALIN NCL PMTA SMG TLUXE VPO AEONTS BEAUTY CITY EASON GLAND J LPH NDR PPM SMIT TMD VTE AF BEC CMR ECL GOLD JMART MAJOR NEP PRIN SORKON TNP WICE AIRA BH COLOR EFORL GSTEL JMT MAKRO NOK PSTC SPA TOPP WIIK AIT BIG COM7 EPCO GYT JUBILE MATCH NUSA QLT SPC TPA WIN AJ BJC CPL EPG HPT JWD MATI PATO RCI SPCG TPAC XO AKR BJCHI CSC ESSO HTC KASET M-CHAI PCA RCL SPVI TPIPL AMARIN BKD CSP FE HTECH KBS MDX PDG RICH SSC TPOLY AMATAV BR CSR FER IFS KCAR MFEC PF RML STANLY TRITN AMC BROCK CSS FOCUS IHL KGI MJD PICO RPC STPI TRT APURE BRR CTW FSMART ILINK KKC MK PIMO SANKO SUC TTI AQUA BTNC DCON FSS INSURE KOOL MODERN PL SAPPE TACC TVI ARROW CBG DIMET FVC IRCP KWC MPG PLAT SAWAD TCCC TWP AS CGD DNA GEL IT KYE NC PLE SCI TCMC U SCN TEAM UBIS SEAOIL TFD UMI SENA TFG UPOIC SIRI TIC UT SKR TIW UWC SLP TKN VIBHA

IOD (IOD Disclaimer) การเปิดเผลผลการสํารวจของสมาคมส่งเสริมสถาบันกรรมการบริษัทไทย (IOD) ในเรื่องการกํากับดูแลกิจการ (Corporate Governance) นี ้เป็ นการ ดําเนินการตามนโยบายของสํานักงานคณะกรรมการกํากับหลักทรัพย์และตลาดหลักทรัพย์ โดยการสํารวจของ IOD เป็นการสํารวจและประเมินจากข้อมูลของบรษัทจด ทะเบียนในตลาดหลักทรัพย์แห่งประเทศไทยและตลาดหลักทรัพย์เอ็มเอไอ ที่มีการเปิดเผยต่อสาธารณะและเป็นข้อมูลที่ผู้ลงทุนทั่วไปสามารถเข้าถึงได้ ดังนั้นผลสํารวจ ดังกล่าวจึงเป็นการนําเสนอในมุมมองของบุคคลภายนอกโดยไม่ได้เป็นการประเมินการปฏิบัติและมิได้มีการใช้ข้อมูลภายในในการประเมิน อนึ่ง ผลการสํารวจดังกล่าว เป็นผลการสํารวจ ณ วันที่ปรากฎในรายงานการกํากับดูและกิจการบริษัทจดทะเบียนไทยเท่านั้น ดังนั้นผลการสํารวจจึงอาจ เปลี่ยนแปลงได้ภายหลังวันดังกล่าว ทั้งนี้บริษัทหลักทรัพย์ อาร์เอชบี จํากัด (มหาชน) มิได้ยืนยันหรือรับรองถึงความถูกต้องของผลการสํารวจดังกล่าวแต่อย่างใด

ขอมูล Anti-Corruption Progress Indicator ของบริษัทจดทะเบียน

ระดับ 1 ACD AEONTS AFC AIRA AJ ALUCON AMC AQUA ARIP AUCT BAT-3K BIG BJC BLISS BMCL BOL BRR BSBM CBG CCET CCN CGD CMR CPH CSC CSP CTW DCON DRACO DSGT DTCI E EMC ESSO FOCUS FSMART GIFT GLAND GRAND GUNKUL HFT HTECH IHL ILINK ITD JSP KDH KTIS KTP LEE LST MAJOR MATCH MAX M-CHAI MDX MIDA ML MPIC NC NEP NNCL NWR OHTL PICO PK PL PPM PRAKIT PRECHA PRIN PSTC PYLON RAM RICH RS SANKO SAUCE SAWAD SAWANG SCN SEAFCO SF SHANG SIRI SMART SMM SOLAR SPACK SPG SPPT SPVI STA STAR SVH SVOA SWC TAPAC TC TCCC TCJ TCOAT TH TKS TNH TNPC TPA TPAC TPOLY TRC TRUBB TSE TTA TTI TTL TTTM TWP TWZ U UMS UPA UPOIC UTP UVAN VARO VI VIBHA VIH VTE WG

ระดับ 2 2S ABICO AF AKP AMARIN AMATA AOT APCO AYUD BEAUTY BFIT BH BKD BLAND BTNC CCP CI CSR CSS EFORL EPCO FE FNS FVC GEL GLOBAL HEMRAJ IEC IFS INET JUTHA KASET KCAR KKC KSL L&E LALIN LTX M MALEE MBK MBKET MEGA MK MPG MTLS NCH NCL NPP OCC OCEAN PB PCA PRINC QH ROCK RPC S & J SGP SIAM SIS SKR SMG SMIT SORKON SUSCO TAKUNI TEAM TF TIC TIP TIPCO TMC TMI TPP TRT TRU TRUE TSC TSI TTW TVD TVO UKEM UNIQ UWC VNG WIIK WIN XO

ระดับ 3A ABC ACAP ADVANC AEC AGE AH AIE AMANAH ANAN AP APCS APURE AS ASIA ASIAN ASIMAR BIGC BROOK BTS BWG CEN CENTEL CFRESH CHARAN CHO CHOTI CM CNT COL CPALL CPF CPI CPL DELTA DEMCO DIMET DNA DTAC EA ECF EE EVER FPI GBX GC GFPT GLOW HMPRO HOTPOT ICC ICHI IFEC INOX INSURE IRC JAS JTS JUBILE KC KTC KYE LHK LPN LRH MAKRO MC MCOT MFC MFEC MINT MJD MONO MOONG NBC NDR NINE NMG NSI NTV OGC PACE PCSGH PDI PG PHOL PLAT PPS PR PRANDA PREB PS QLT RATCH RML ROBINS ROJNA RWI SAMCO SCCC SCG SEAOIL SE-ED SENA SINGER SITHAI SMK SMPC SPALI SPC SPCG SPI SRICHA SSI STANLY SUPER SVI SYMC SYNEX SYNTEC TASCO TCMC TFI THAI THRE THREL TICON TKT TLUXE TMILL TMT TNL TPCORP TSTE TSTH TTCL TU TVI UOBKH UREKA VGI VNT WACOAL WHA ZMICO

ระดับ 3B AAV AHC AI AIT AKR ARROW ASK BA BDMS BEC BECL BJCHI BUI CGH CHG CHOW CIG CITY CK CKP COLOR CWT EARTH EASON EPG F&D FANCY FIRE FMT FORTH GENCO GL GOLD GPSC GRAMMY HYDRO IRPC IT JCT KCM KWC LH LIT LOXLEY MACO MANRIN MATI MODERN MSC NOBLE NOK NPK NUSA OISHI OTO PAF PAP PATO PF PJW PLANB PLE POLAR PRG PTL Q-CON QTC RCI S11 SALEE SAM SAMART SAMTEL SAPPE SC SCP SFP SIM SLP SMT SPA SPORT SSC SST STEC STPI SUC SUTHA T TAE TBSP TCC TFD TGCI TGPRO THANA THIP TIW TK TMW TNDT TOPP TPC TPCH TPIPL TSR TT TYCN UAC UBIS UEC UMI UP UPF UT UV VPO WAVE WINNER YUASA

ระดับ 4 ASP BAFS BANPU BAY BBL BKI BLA CIMBT CNS CSL DCC DRT DTC EASTW ECL EGCO ERW FSS GCAP HANA HTC INTUCH IRPC IVL KBANK KCE KGI KKP KTB LANNA LHBANK MTI NKI PSL PTG PTTEP SABINA SCB SNC SNP SSF SSSC TCAP THCOM TISCO TMB TMD TNITY TOG

ระดับ 5 BCP CPN GYT PE PM PPP PT PTT PTTGC SAT SCC THANI TOP

ไมเปดเผยหรือไมมีนโยบาย A ACC AJD AQ BCH BGT BROCK BSM BTC CHUO

CPR CRANE EIC FER JMART JMT KAMART KBS KIAT LDC

MBAX MCS METCO NEW NEWS NYT PAE PDG PERM PMTA POST RCL RICHY ROH S SIMAT TCB TR TSF TVT WORK

หมายเหตุ ระดับ 1: มีนโยบาย ระดับ 2: ประกาศเจตนารมณ ระดับ 3: มีมาตรการปองกัน ซึ่งทั้ง 2 กรณี ถือเปนผลการประเมินในระดับเดียวกัน 3A: บริษัทมีการประกาศเจตนารมณเขารวมโครงการ CAC หรือภาค 3B: บริษัทมีคํามั่นและนโยบายของบริษัท แตมิไดประกาศเจตนารมณเขารวมโครงการ CAC หรือภาค ระดับ 4: ไดรับการรับรอง ระดับ 5: ขยายผลสูผูที่เกี่ยวของ