TA slashes MAHB earnings forecasts by 50%–83%



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KUALA LUMPUR (May 6): TA Securities has slashed Malaysia Airports Holdings Bhd’s (MAHB) earnings forecasts for FY15 to FY17 by 50% to 83% to account for the additional amortisation expenses.

It expects the additional amortisation cost to be a recurring item until the Istanbul Sabiha Gokcen Uluslararasi Havalimani Yatirim Yapim Ve Isletme A.S. (ISG) concession expires in 2030.

The MAHB-owned ISG operates the airport of the same name in Istanbul, Turkey.

The earnings downgrade came following the airport operator’s announcement yesterday that its net profit plunged 74.7% to RM32.6 million in the first quarter ended Mar 31, 2015, from RM128.7 million a year ago, mainly dragged by finance cost.

MAHB’s (fundamental: 1; valuation: 1.4) core losses of RM30.9 million for FY15 is compared against TA’s full-year forecast of RM270 million and consensus estimates of RM240 million.

TA said the additional amortisation cost arose from the change in depreciation method in the fourth quarter last year.

“This treatment is basically resulted from the increased fair value in ISG due to MAHB’s acquisition of the balance 40% stake, which will then be amortised throughout the concession period,” TA research analyst Tan Kam Meng wrote in a note today.

Tan projects ISG to break even only in FY16 as a result of the additional amortisation cost, but quoted management expects to be profitable operationally this year.

He maintained his “sell” call for the stock with an unchanged target price of RM6.94.

At 10.52 am today, MAHB slipped 7 sen or 1.03% to RM6.75 on thin trades of 4,800 shares.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)