TA Securities maintains 'sell' call on MAHB, TP RM7.49, on passenger traffic decline

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KUALA LUMPUR (Oct 14):  TA Securities has cut Malaysia Airports Holdings Bhd’s (MAHB) discounted cash flow (DCF) valuation to RM7.49 per share from RM7.82 previously based on a discount rate of 8.6%, and has maintained its sell call on the stock .

“Although MAHB’s share price has retreated 17.5% over the past 3 months, we are not in a hurry to take position in the stock until we see signs on passenger traffic recovery and diminishing Ebola fear,” said TA in a note today.

MAHB reported that total passenger movement in September 2014 declined by 1.4% year on year (y-o-y) and ---4.1% month on month (m-o-m) to 6.6 million, which was led by a 1.6% drop y-o-y and -2.6% drop m-o-m in domestic passenger movement and 1.2% drop y-o-y and -5.7% drop m-o-m in international passenger movement.

TA said that the decline in passenger movement in September marked the second consecutive y-o-y decline since August.

“The cumulative year to date (YTD) growth has moderated further to 6.8% from 7.7% a month ago in the aftermath of Malaysian Airlines Flight 370 and MH17 incidents,” said TA.

The research house added that according to MAHB management, traffic from China, Macau and Hong Kong continued its declining trend while the Netherlands and the United Kingdom also experienced contraction in passenger traffic in September 2014.

“Looking forward, travel sentiment is expected to remain low due to negative sentiment with MH370 and MH17 incidents remaining strong,” said TA.

TA said that it has cut MAHB’s passenger movement assumptions for the 2014-2016 financial years to 86.4 million-93.6 million, from 87.9million-95.3million previously, and has downgraded FY14, FY15 and FY16 earnings assumption by 38.7%,12.4% and 9% respectively.