Comprehensive Analysis: Sky ICT and Airports of Thailand (AOT)

Date: January 9, 2025

Broker: Maybank Securities (Thailand) PCL

Sky ICT (SKY TB): A Prime Beneficiary of Government IT Investments

Sky ICT (SKY TB) has emerged as a standout player in the tech services sector, capitalizing on Thailand’s growing government IT investments and the recovery of the tourism sector. Maybank Securities has reiterated a BUY recommendation for Sky ICT, with a target price of THB30.10, representing an upside of 26% from its current price of THB23.90.

Key Drivers for Growth

The company is poised to benefit from a 20% year-over-year increase in the IT spending budget of five major government agencies in fiscal year 2025, totaling THB39 billion. Additionally, project delays from the FY24 budget are expected to boost government capital expenditures in FY25.

Major IT Spending Agencies

• Ministry of Interior: Allocated THB26 billion, with 51% directed to public service and government efficiency, 48% for smart cities, and 1% for digital government integration.
• Ministry of Digital Economy and Society (DES): Budgeted THB5.8 billion, focusing on digital integration and public service enhancements.
• Other Agencies: Department of Airports, State Railway of Thailand, and Customs Department also contribute significantly to IT-related expenditures.

Financial Performance and Projections

Sky ICT’s revenue is forecasted to grow from THB6.58 billion in FY24 to THB10.85 billion in FY25, driven by a 213% increase in system integration (SI) revenue. Core profit is expected to rise by 56% year-over-year in FY25 to THB842 million. The company’s revenue streams are diversified into three main categories:

• Services (77% of FY23 revenue): Includes passenger processing services. Revenue from Common Use Passenger Processing System (CUPPS) and Advanced Passenger Processing System (APPS) depends on passenger movements at Airports of Thailand’s six airports.
• System Integration (21% of FY23 revenue): Supported by large government projects in FY25.
• Product Sales (2% of FY23 revenue): A minor but consistent contributor.

Valuation and Recommendation

Maybank Securities values SKY at THB30.10 per share based on a sum-of-the-parts (SoTP) model, comprising:

• Airport-related services: Valued at THB23.6, based on 32x FY25E P/E.
• System integration business: Valued at THB6.5, based on 15x FY25E P/E.

Key risks include political instability, which could delay government projects.

Airports of Thailand (AOT TB): A Solid Investment for Tourism Recovery

Airports of Thailand (AOT TB) has been highlighted as another strong investment opportunity. Its strategic position as a gateway for Thailand’s thriving tourism sector underpins its growth potential.

Current Valuation and Recommendation

Maybank Securities maintains a BUY recommendation for AOT, with a target price of THB75.0, up from its current price of THB59.5. The company is expected to benefit from the increasing number of international and domestic passenger movements as global travel rebounds.

Subsidiaries and Strategic Investments

AOT also indirectly owns a 21.5% stake in AOT Ground Aviation Services (AOTGA), which plays a crucial role in ground handling at Suvarnabhumi Airport. This investment is expected to contribute positively to AOT’s performance in the coming years.

Growth Catalysts

The recovery of global tourism and the rise in passenger numbers are the primary growth drivers for AOT. Additionally, its ability to manage and expand its airport operations efficiently will be crucial in sustaining long-term growth.

Conclusion

Both Sky ICT and Airports of Thailand represent compelling investment opportunities in Thailand’s technology and tourism sectors, respectively. Sky ICT’s position as a prime beneficiary of government IT spending and AOT’s strategic role in the tourism industry make them standout performers for 2025.

Investors are encouraged to consider these opportunities, keeping in mind the robust financials, growth drivers, and risks discussed in this analysis.