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MAHB exceeds expectations but outlook remains cloudy

0 month ago, 28-Nov-2019

MIDF Research explained that MAHBs domestic traffic growth in Malaysia during 9MFY19 of 10 per cent y-o-y outpaced its international traffic growth of 2.2 per cent y-o-y as airlines redirected more capacity to meet the domestic travel demand.

KUCHING: Malaysia Airports Holdings Bhd (MAHB) reported a solid set of results for the first nine months of 2019 (9M19) but analysts believe its outlook remains cloudy due to uncertainties surrounding the Regulated Asset Base (RAB) framework.

Discussions on the Operating Agreements (OAs) with the government and the Regulated Asset Base (RAB) framework are still ongoing.

While the Malaysian Aviation Commission (MAVCOM) is committed to implementing the RAB on January 1, 2020, we see possible delays given that there are some outstanding issues to be ironed out, the airlines need at least two months of advance notice to implement such significant changes in the PSC fee, and there are still discussions on the possible adoption of Public-Private Partnership models to develop/manage the airports, said the research team at Affin Hwang Investment Bank Bhd (AffinHwang Capital).

The research team at MIDF Amanah Investment Bank Bhd (MIDF Research also pointed out that there could be a lag in discussions as a new secretary general at the Ministry of Transport (MOT) was being appointed.

With the new secretary general on MAVCOMs board of commissioners, deeper discussions could be down on tracking the implementation of RAB targeted by year end, it said.

Nevertheless, it believed that while a delay in the RAB framework is an impending risk, there could be sufficient mechanisms for MAHB to recoup whatever charges and returns that would be set.

On MAHBs third quarter of the financial year 2019 (3QFY19) MAHB recorded normalised earnings (after excluding one-off gains) of RM192.2 million, bringing its 9MFY19 normalised earnings to RM467.9 million (up 22.4 per cent y-o-y).

The 9MFY19 revenue (excluding construction revenue) rose by 7.5 per cent y-o-y, in-line with the overall 5.5 per cent y-o-y growth of passengers traffic in both Malaysia and Turkey for the period.

MIDF Research explained that MAHBs domestic traffic growth in Malaysia during 9MFY19 of 10 per cent y-o-y outpaced its international traffic growth of 2.2 per cent y-o-y as airlines redirected more capacity to meet the domestic travel demand.

Moreover, there was a series of three long weekends in September 2019 and the Aidiladha and the national day holidays in August. The haze which occurred in the middle of September appeared to have no impact to the travel sentiment, it added.

Looking ahead, it expected airlines to continue shifting capacity from the international to domestic sector at least until 1Q20.

As for its international traffic, the research team said although the international traffic did not grow as much as the domestic traffic 9MFY19, the international passenger traffic of 13.4 million recorded in 3Q19 was also the highest ever recorded on a quarterly basis in Malaysia.

All in, MIDF Research said: We opine that the current momentum of passengers traffic combined with the start of Visit Malaysia Year 2020 will continue to provide a strong base for incremental revenue generation moving forward.

Moreover, the additional departure levy imposed on international departing passengers especially for economy class remains lower than regional peers such as Hong Kong, Thailand and Australia.

Other growth factors would include direct connectivity seen from international airlines flight straight to locations such as Langkawi.

As such, we strongly believe that MAHB passenger numbers can surpass the 100 million mark in 2019, while maintaining a relatively conservative growth rate of 3.5 per cent which translates to RM102.5 million passengers.

It retained a buy call on the stock, while AffinHwang Capital pegged a hold rating on the stock.

It explained: While we see a merit on the proposed RAB framework, which should in turn improve MAHBs profitability and earnings visibility, there are risks on implementation (timing of implementation, WACC, risk of cancellation).

MAHB exceeds expectations but outlook remains cloudy Borneo Post Online.




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