This article first appeared in The Edge Financial Daily on September 14, 2018

Malaysia Airports Holdings Bhd
(Sept 13, RM9.04)
Maintain neutral with an unchanged target price (TP) of RM9.88: The August passenger traffic for airports in Malaysia saw

another positive improvement, growing by 0.9% y-o-y excluding Istanbul Sabiha Gokcen International Airport (ISGA), recording a total of 8.5 million passengers.

Despite the Turkish lira crisis, the passenger traffic growth in ISGA for August 2018 remained resilient at 8.5% year-on-year (y-o-y), bringing the total passenger number under Malaysia Airports Holdings Bhd (MAHB)’s network of airports to 11.8 million or 2.9% y-o-y higher.

This overall number of passengers was among the highest achieved thus far and was partly attributable to the summer holidays in Turkey and the Hajj travel season.

Domestic traffic for Malaysia in August 2018 increased by 0.8% y-o-y to 4.1 million passengers, mainly contributed by the 5.7% y-o-y growth in KLIA2.

For the international sector, passenger traffic in Malaysia showed a positive yearly growth for the third straight month albeit at a tapered level of 1% y-o-y compared to 17.1% y-o-y in August last year.

This was due to the high base effect from the SEA Games held from Aug 19 to Aug 30, 2017 in addition to the school holidays.

Nonetheless, the momentum of the international sector for Malaysia has remained consistently above 4.2 million passengers for the past three months, which we opine will help to expand the traffic percentage of high value passengers moving forward.

Accordingly, we expect the seasonal factors such as China Golden Week and school holidays will continue to lend support to MAHB’s earnings for the rest of the year.

We believe the strong momentum of traffic flow to continue, which will be led by the international segment. We premised our expectations on the robust air travel demand.

Chinese tourists are still expected to be the driver, due to supportive visa policies in Malaysia. We recall that Chinese accounted for 10.0% of Asian tourists in 2017.

While we note this positive development, we believe that the positives have already been priced in. Accordingly, we maintain our “neutral” call on the stock with an unchanged TP of RM9.88. — MIDF Research, Sept 13