This article first appeared in The Edge Financial Daily, on November 13, 2015.

Malaysia Airports Holdings Bhd
(Nov 12, RM5.13)
Maintain buy with a target price (TP) of RM6.30: Malaysia Airports Holdings Bhd (MAHB) registered a drop of 5.3% year-on-year (y-o-y) in total passenger movements, affected by Malaysia Airlines’ (MAS) capacity rationalisation, ringgit depreciation (less travel by locals) as well as the haze (cancellation of more than 1,000 flights, especially in the domestic sector). Year to date (YTD), growth was +1.2% y-o-y (versus ours +2.2% y-o-y for financial year 2015 [FY15]).

On the other hand, ISG (Turkey) continued to register healthy growth at +17.1% for October and +19.3% y-o-y YTD, in line with our expectations of +19.4% y-o-y for FY15.

On a sector basis, traffic in Southeast Asia was lowered due to the haze situation, while Oceania was also affected by AirAsia X Bhd’s capacity cuts. China maintained positive growth despite the haze.

Risks include world crises (war and epidemic outbreaks, among others); shutdown and high maintenance for klia2; and the development of high-speed train between Singapore and Malaysia. We maintain our forecasts. Positives include MAHB’s monopoly of airport operations in Malaysia (except Senai); and being the main beneficiary of strong air traffic into Malaysia, in line with government initiatives to boost the tourism sector.

Negatives are low liquidity; the restructuring of MAS; and the short-term impact from the haze. — Hong Leong IB Research, Nov 12