Malaysia Airports Holdings Bhd
(March 11, RM6.88)
Maintain buy with a target price (TP) of RM8.30: International passenger movement dropped by 4% but domestic passenger movement increased by 2%.

Overall, Malaysia Airports Holdings Bhd’s (MAHB) February passenger movement went up by 1.9% year-on-year (y-o-y), on the back of stronger Istanbul Sabiha Gokcen International Airport (SGIA) passenger movement which saw a 14.2% y-o-y growth, translating into an 81% load factor.

We note that the Chinese sector continued to experience a double-digit drop in February 2015, after the Malaysia Airlines’ MH370 incident in March 2014.

But the Europe sector grew by 3.3% and the South Asia sector also experienced double-digit growth.

We remain optimistic about the aviation outlook with February statistics showing improvement in overall traffic versus January’s 4.6% decline y-o-y (post Air Asia’s QZ8501 incident in December 2014). 

We maintain our passenger movement growth forecast at 4.9% for 2015. Risks are world crises (i.e. war, tourism and disease epidemics); cost overrun and operation disruptions in klia2; development of the high-speed train between Singapore and Malaysia and the major movement of airlines from KLIA to klia2.

Positives are the monopoly of airports operation in Malaysia (except Senai), main beneficiary of strong air traffic into Malaysia, in line with government initiatives to boost the tourism sector and potentially higher non-aeronautical revenue. — Hong Leong Investment Bank Bhd, March 11

This article first appeared in The Edge Financial Daily, on March 12, 2015.