Malaysia Airports Holdings Bhd
(Aug 11, RM6.27)
Maintain market perform with an unchanged target price of RM6.43: Malaysia Airports Holdings Bhd’s (MAHB) total passenger growth for Malaysian airports and Istanbul Sabiha Gökçen International Airport (ISGA) was up 2.9% and 9.2% year-on-year (y-o-y) and year to date (YTD) respectively, in line with our targets of 3% and 10% respectively.

MAHB’s total July passenger number (including ISGA) registered a growth of 5.1% y-o-y due to heightened travel demand for the Raya holiday season. In July, MAHB’s passengers in Malaysia increased 8.5% y-o-y. International and domestic passengers were up 9.9% and 7.2% respectively. The overall increase was mainly due to increased travel during the Raya holidays and timing seasonality of this year’s Ramadan period versus last year.

Kuala Lumpur International Airport (KLIA) registered a strong growth of 26.5% y-o-y with international and domestic passengers registering positive growth of 16.1% and 67.3% respectively. Besides the Raya holiday, the immense growth was also supported by Malaysia Airlines Bhd’s strong passenger growth of 27% on the domestic front. We note that this is the first time KLIA recorded a positive growth of 0.3% y-o-y and YTD.

klia2’s passenger growth was down 1.3% y-o-y largely due to passenger traffic moderating from Malindo and Lion Air’s shifts in operations from klia2 to KLIA since March 15, 2016. Besides that, we believe Malaysia Airlines is recapturing market share from airlines operating in klia2 since its restructuring in September 2015.

ISGA’s passenger growth further weakened to 3.8% y-o-y due to travel warnings issues by various countries after the bombing at Atatürk Airport, a failed military coup and the declaration of state of emergency in Turkey. International traffic remained at a negative growth of 7.8% while domestic traffic dipped into a negative growth of 1.9% for the first time. Recall that we trimmed our ISGA passenger traffic growth estimate down from 20% to 10% in our last report amid these negative events.

As passenger traffic numbers are on track, we make no changes to our passenger growth and earnings forecasts. 

We believe rerating catalysts lie with extension of operating agreements, stronger traffic on the international front and faster-than-expected recovery of Turkish operations. 

— Kenanga Research, Aug 11