Wednesday, April 1

MAHB gains from new PSC move, AirAsia in the limelight

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KUCHING: Passenger volumes are expected to grow at Malaysian airports for the financial year 2017 (FY17) despite the new Passenger Service Charges (PSCs) being implemented in all Malaysian-operated airports beginning January 1, 2017.

The new PSC rates are expected to boost Malaysia Airport Holdings Bhd’s (MAHB) revenue by 10 per cent and provide improved earnings visibility for their Malaysian operations which has been accounted for in Kenanga Investment Bank Bhd’s (Kenanga Research) estimates.

“We look forward to the next hike in PSC in FY18 whereby KLIA Main and KLIA2 will have the same PSC rates,” it added in a report yesterday.

“For FY17, the only difference in PSC rates for KLIA Main and KLIA2 is their International PSCs whereby KLIA1 is at RM73 while KLIA2 is at RM50.”

For MAHB, the research house maintained its positive stance as the newly improved PSC structure will see the equalisation of charges in KLIA Main, and KLIA2 by FY18 providing better earnings visibility for the group.

“Despite the current poor international traffic at Turkey, we believe travel sentiment would gradually improve, citing the recovery of Malaysian domestic air travel and the return of China travellers post the triple air tragedy in 2014.

“Hence, we believe our current valuations is fair given the better earnings outlook ahead from new PSC structure.”

Yesterday, MAHB closed one sen higher on Bursa at Rm6.10 per share with 1.84 million shares being traded.

For the first eleven months of 2016, MAHB saw its total passenger movement for Malaysian and Turkey operations registering growth of 5.8 and 5.3 per cent year on year to date. This was in line with the research firm’s estimates of six and seven per cent respectively.

This led Kenanga Research to believe that Malaysian operations passenger growth remains robust supported by improved load factors from strong travel demand and new foreign airlines and MAB operating at increased frequencies.

“Meanwhile, Turkey’s travel statistics remain subdued from recent bombing incidents and travel threats, which have severely affected their international passenger growth, registering monthly negative growth since June 2016.

“We note that since the bombing at Ataturk Airport in June 2016, we have revised our Turkey passenger estimates downward twice to seven per cent. Moving into FY17, we keep our estimates unchanged for Malaysian and Turkey, respectively, as we expect Malaysian passenger growth to remain strong from strong travel demand coupled with increased capacities.”

Meanwhile, Kenanga Research remained positive on AirAsia Bhd (AirAsia) premised on high yields on higher ancillary income and healthy load factor from strong travel demand coupled with fleet expansion.

“Despite the rising fuel costs, we believe AirAsia’s fuel risks are greatly minimized as about 80 per cent of its FY17 fuel is hedged at US$59 per barrel. In comparison, we note that 9M16 fuel already averaged at US$59 per barrel.

“New PSC rates will have minimal impact for the group as most of AirAsia’s international flights are flown towards the Asean region which will fall under the new RM35 Asean segment (PSC effectively only up by RM3) – allowing AirAsia to keep their competitive pricing.

“Furthermore, we are also excited on its leasing arm divestment plan in the first half of 2017 and investors are expecting a round of special dividend pay-out.

“We make no changes to AIRASIA’s call with an unchanged target price of RM3.82 as we believe that it will be a good time for investors to accumulate on weakness underpinned by the prospect of special dividends.”