Malaysia Airports Holdings Bhd
(Jan 11, RM8.99)
Maintain underperform with an unchanged target price (TP) of RM8.38: Malaysia Airports Holdings Bhd (MAHB) registered a passenger growth (including Istanbul Sabiha Gökçen International Airport [ISG]) of 7.8% (+8.5% for Malaysian operations, +5.6% for Turkey operations) year-on-year (y-o-y) for financial year 2017 (FY17), which we deem in line with our total growth forecast of 9.2% (+10% for Malaysian operations, +7% for Turkey operations). While the growth of 7.8% seems slightly lower than our targeted growth forecast of 9.2%, we note that in terms of total passenger count, it is minimal where total airport passenger count was at 127.9 million versus our target of 129.4 million (accounting for 99%).
For December, passengers in Malaysia increased 1.1% y-o-y. International passengers were up 10% while domestic passengers decreased 7.5% y-o-y. We believe the overall increase in international traffic was due to visa relaxation for travellers from India and China. Meanwhile, the decrease in domestic demand was due to capacity cuts from Malaysia Airlines Bhd and Malindo Airways Sdn Bhd as they rationalised their capacity allocation, which was partially masked by increased capacity by AirAsia Bhd.
In December, Kuala Lumpur International Airport (KLIA) registered a negative growth of 2.4% y-o-y with international passengers registering a positive growth of 11.7% while domestic traffic contracted 34.4%. KLIA international growth was supported by increased seat capacities by airlines (such as Malindo, Xiamen Airlines, Hong Kong Dragon Airlines Ltd, Saudi Arabian Airlines, and Emirates) and stronger travel demand while the domestic contraction was due to a reduction in capacity by Malaysia Airlines, FlyFirefly Sdn Bhd, and Malindo as explained. klia2’s positive traffic growth continued at 11.8% y-o-y (international: 9.2%, domestic: 17.4%), which we believe was attributable to a strong growth from AirAsia and AirAsia X Bhd as they increased their capacity through higher plane utilisation. We are targeting a milder Malaysian growth of 8% for FY18 (vs 10% in FY17) due to lower seat capacities by key airlines (Malindo, Malaysia Airline) and a weaker currency advantage from the stronger ringgit.
ISG’s passenger growth for December registered its 10th consecutive y-o-y growth in FY17 at an all-year high of +16.2% (international: +18.6%, domestic: +15.1%). Y-o-y, Turkey performed well, registering +5.6% (vs FY14’s 4.8%). We are positive about the recovery of Turkey from the negative streak of events that shook Turkey since early FY16, and we are targeting a double-digit growth target of 10% for its Turkey operations in FY18. — Kenanga Research, Jan 11