Malaysia Airports Holdings Bhd 
(May 6, RM6.59)
Maintain hold with lower target price (TP) of RM6.75: Malaysia Airports Holdings Bhd’s first quarter ending Dec 31 of financial year 2015 (1QFY15) core net profit of RM32 million, down 74.1% year-on-year (y-o-y) and 19.3% quarter-on-quarter (q-o-q), was within expectations at 24% of our full-year estimate. 

Some noteworthy updates from the management: (i) Istanbul Sabiha Gokcen (ISG) has been fully consolidated into 1QFY15 accounts, rendering y-o-y and q-o-q not like-for-like comparisons; (ii) Malaysian operations are enduring stuttering traffic growth, whereas Istanbul continues to enjoy robust traffic growth; (iii) no government directive on passenger service charge equalisation at klia2, suggesting that it has been delayed to a later period; and (iv) a single-tier final dividend per share of 3.6 sen was announced for FY14; a drop of 43% y-o-y, which is in tandem with the decline in profits.

1QFY15’s performance is a reflection of the company’s main assets (klia2 and ISG) undergoing their start-up phases, whereby they are incurring losses and consuming capital. The management maintains its cautious outlook for 2015 with concerns about muted traffic growth and capacity cuts from Malaysia Airlines. We tweak our FY15 to FY17 earnings forecast lower by -3.6%, -1.9% and -1.1% respectively. Our TP has been revised down to RM6.75 based on an unchanged 1 times FY16 price-to-book value peg, and the stock remains a “hold”. — Maybank IB Research, May 6

This article first appeared in The Edge Financial Daily, on May 7, 2015.