Saturday, May 15

MAHB’s Malaysia, Turkey operations records strong growth trajectory

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MAHB recorded strong passenger traffic growth in both its Malaysian and Turkish operations, and analysts believe that the airport operator could record a solid 2Q17 results. — Bernama photo

KUCHING: Malaysia Airports Holdings Bhd (MAHB) recorded strong passenger traffic growth in both its Malaysian and Turkish operations, and analysts believe that the airport operator could record a solid second quarter of 2017 (2Q17) results (out on July 31).

Maybank Investment Bank Bhd’s research arm (Maybank IB Research) opined, “MAHB’s 2Q17 results look to be solid as total passenger traffic growth soared by 11.6 per cent year-on-year (y-o-y) and the higher yielding international passenger mix has increased by two percentage points (ppt) y-o-y to 45.8 per cent.

“We estimate a 2Q17 core net profit of RM71 million (versus a RM12 million loss in 2Q16 and an increase of 10 per cent quarter-on-quarter).”

All in, the research team pointed out that MAHB’s passenger traffic growth came in above expectations.

“2Q17 y-o-y passenger traffic growth in MAHB’s Malaysian operations was 13.8 per cent, which blowout our base forecast of 10 per cent for the first 12 months of 2017 (12M17).

“Consumers are drawn to the lower airline ticket prices made possible by lower fuel prices in the period as well as battle for market share by the airlines. ISG delivered 5.1 per cent traffic growth y-o-y in 2Q17.

“This is a quick rebound in growth since 4Q16 which suggests that the increasing domestic stability is providing the platform for sustainable traffic growth going forward,” it said.

It further noted that the rebound in ISG was the first y-o-y quarterly growth since late 2016 when the country has underwent some domestic political disturbances.

Currently, Maybank IB Research’s biggest concern about the stock is MAHB’s ability to reduce operating cost.

“Our recent visit to the airports affirms that KLIA is in dire need to increase its staff headcount.

“They are series of long queues everywhere (security checks and immigration) and it has come to a point where it is negatively impacting on the user experience.

“MAHB needs to invest significantly in order to boost its operational capability to enable it to cater to the robust traffic growth that it is enjoying,” it suggested.

Overall, the research team pegged a ‘hold’ call on the stock. It said, MAHB’s valuations are at a ten year peak based on enterprise value per earnings before interest, tax, depreciation and amortisation and profit per book value.

Similarly, it noted that foreign shareholding is at a record 33 per cent as of the end of June 2017.

“The level of investor optimism is at an all-time high and the management has to absolutely dazzle the market to obtain a further rerating.

“Taking a look purely on fundamentals, we believe MAHB risk-reward is fairly balanced and hence our ‘hold’ call,” it added.