Malaysia back in vogue for international passengers

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KUCHING: Passenger traffic growth at Malaysia Airports Holdings Bhd (MAHB) far exceeded expectations for the first quarter of 2017 (1Q17) and analysts believe that this was due to the recovery in confidence of Malaysia’s aviation industry.

In a report, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) said the 1Q17 y-o-y passenger traffic growth in MAHB’s Malaysian operations was 10.5 per cent, which blow out its base forecast of eight per cent.

“The outperformance in the Malaysian operations was attributed to stronger-than-expected tourist arrivals, especially from China, we believe.

“After 2.5 years of desolation, Malaysia is back in vogue for international tourists,” it opined.

MAHB’s Turkish operations were also looking up, following the rough 2016 which was plagued by major incidents such as the terrorist attack on a key international airport there and an attempted military coup.

The research team noted that ISG saw 1.9 per cent fewer passenger traffic y-o-y in 1Q17 which is within its expectation.

However, it pointed out that the positive Turkish referendum will bring greater stability and hopefully traffic growth recovery.

As for the collaboration between MAHB and Alibaba to set up a regional logistic hub at KLIA, the research team noted that this initiative fits very well with MAHB’s KLIA Aeropolis story.

“However, we don’t foresee any financial contribution in the medium term as the journey between planning, construction and commencement of operations will likely consume four to five years,” it opined.

Overall, the research team estimate a 1Q17 core net profit of RM63 million (versus a RM8 million loss in 1Q16 and 121 per cent increase q-o-q).

“We have made revisions to our Malaysian passenger growth projection. We have increased 2017 y-o-y growth rate assumption by an additional two percentage points to 10 per cent and increase it by one ppt for our 2018 to 2026 traffic growth assumption (now expecting six per cent in 2018, six per cent in 2019).

“We have kept our passenger growth projections unchanged for ISG (down two per cent in 2017, up four per cent in 2018, up six per cent in 2019).

“Due to this, we have raised our 2017 to 2019 earnings projections for MAHB by three, 3.4 and 3.6 per cent respectively,” it projected.