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This article first appeared in The Edge Financial Daily on August 14, 2018

Malaysia Airports Holdings Bhd
(Aug 13, RM9.33)
Maintain buy with an unchanged target price (TP) of RM9.88:
The July passenger traffic for airports in Malaysia marked another positive improvement, growing by +2.2% year-on-year (y-o-y) (+4.2% including Istanbul Sabiha Gocken International Airport), recording a total of 8.6 million passengers. Notably, both domestic and international sectors posted record passenger movements for a month, surpassing of last year’s December. Despite this, we take note of the slowdown in growth which we attribute to the high base effect in the same period last year, due to the Hari Raya   holiday season in July 2017.

Domestic traffic in July declined marginally by -1% y-o-y to four million passengers. While the overall domestic numbers continued to trend down, klia2 was able to sustain its growth momentum, handling +9.2% y-o-y more domestic passengers. Meanwhile, airports in Malaysia continued to attract passengers in the international sector, growing by +5.1% y-o-y. The momentum has been consistent over the past few months, which we opine will help to expand the traffic percentage of high value passengers moving forward. Accordingly, we expect seasonal factors such as China Golden Week and school holidays will continue to lend support to Malaysia Airports Holdings Bhd’s (MAHB) traffic for the rest of the year.

We believe the strong momentum of traffic flow primarily international to continue, underpinned by the robust air travel demand. Chinese tourists are expected to be the driver. Recall, tourists from China accounted for 13.2% of Asian tourists, in which the number of passengers have grown at a compound annual growth rate of +12.2% annually. Given this positive development along with the supportive visa policies in Malaysia, our optimism about MAHB’s prospects remains strongly intact. Accordingly, we maintain our “buy” call on the stock with an unchanged TP of RM9.88. While the upside may be less than our threshold for a buy (more than +10%), we are maintaining our call for now pending the announcement of its quarterly results in August 2018. — MIDF Research, Aug 13

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