This article first appeared in The Edge Financial Daily on December 12, 2018
Malaysia Airports Holdings Bhd
(Dec 11, RM7.67)
Maintain buy with an unchanged target price (TP) of RM9.88: Total passenger movements (including Istanbul Sabiha Gokeen International Airport [ISGA]) for Malaysia Airports Holdings Bhd (MAHB) advanced +3.8% year-on-year (y-o-y) in November 2018. Domestic passenger traffic saw its biggest gain since June 2018. International passenger traffic soared to a three-month high amid the commencement of flights by new airlines. We maintained our “buy” call with an unchanged TP of RM9.88 per share.
MAHB airports’ (excluding ISGA) November passenger traffic grew +4.3% y-o-y to 8.3 million passengers, bringing the year-to-date passenger traffic to 89.7 million. ISGA’s robust international passenger growth of +15.5% y-o-y for the same month outweighed the effects of the cancellation of Izmir’s daily route by Sunexpress airlines, and the reduction of aircraft utilisation by Pegasus airlines for domestic routes. As such, MAHB’s total passenger traffic grew 3.8% y-o-y in November, marking its 11th month of positive growth for 2018.
Domestic traffic for Malaysia in November 2018 increased +4.6% y-o-y to four million passengers, the biggest gain since June 2018 which saw an +11% y-o-y increase. Most of the growth was attributable to a +13.1% y-o-y jump in domestic traffic at klia2 in the wake of AirAsia Group’s capacity expansion in the third quarter of financial year 2018 (3QFY18).
Likewise, international passenger traffic in Malaysia advanced +3.9% y-o-y to 4.3 million passengers, the largest in three months. Indian low-cost airline Indigo Airlines, and German leisure airline Condor Airlines starting flights to klia2 and the Kuala Lumpur International Airport’s Main Terminal respectively drove the growth in the international sector, resulting in a commendable load factor of 77.8% in November, +1 points higher than that a year ago.
We reckon there is more space for passenger growth in December as major school examinations are set to end by middle of the month. This is in addition to two more public holidays — the Sultan of Selangor’s birthday and Christmas on Tuesdays that will likely encourage Malaysians to extend their leave and travel. As such, we are maintaining our passenger forecasts for FY18.
On the departure levy set to be imposed in June 2019 for outgoing international passengers, the sensitivity towards increasing passenger service charges for international destinations has, historically, always been minimal. Moreover, we reckon the overall tourism initiatives outlined in Budget 2019 could uphold demand in the nation’s tourism sector, supporting the overall load factor at MAHB airports. We maintained our “buy” call on MAHB with a TP of RM9.88 per share. — MIDF Research, Dec 11