MAHB’s earnings growth expected to remain resilient

Malaysia Airports Holdings Bhd
(Jan 13, RM7)
Maintain buy with an unchanged target price (TP) of RM8.58:There is no change to our financial year ended Dec 31, 2019 (FY19) to FY21 earnings projections. However, we reiterate our “buy” recommendation on Malaysia Airports Holdings Bhd (MAHB) with an unchanged TP of RM8.58 per share. We opine that now is a good opportunity to buy MAHB shares after recent excessive selling pressure on the stock. Essentially, we believe its earnings growth would remain resilient with or without the Regulatory Asset Base (RAB) framework model. In our opinion, the resignation of Raja Azmi Raja Nazuddin as MAHB group chief executive officer and the merger of the Malaysian Aviation Commission and the Civil Aviation Authority of Malaysia are signals that the RAB framework is no-go for MAHB.

However, we do not think that this is an Armageddon for the company and believe that MAHB’s future profitability would remain relatively intact in accordance with the operating agreement signed in 2009, which would see a passenger service charge hike every five years. In conjunction with Visit Malaysia Year 2020, we expect another record passenger year for MAHB with total passenger movements of 110.4 million (up 4.8%).

In December, MAHB recorded a growth in passenger movements of 5.4% to 9.9 million, supported by 6.2% and 4.6% rises in passenger movements in the domestic and international segments respectively. Meanwhile, growth in the international sector was driven by a 4.1% increase in the Asean sector and a 5.1% increase in the non-Asean sector.

In terms of breakdown, the international segment accounted for 52% of total passenger movements in December, higher than the norm of 50%, mainly due to year-end festive seasons and school holidays.

The Istanbul Sabiha Gokcen International Airport achieved a 7.3% increase in passenger movements to 2.8 million in December 2019 with the international segment recording its strongest growth performance of 24.5% year-on-year, which more than offset a 2.6% contraction in domestic movements. — TA Securities, Jan 13