Investment Highlights

• We now project a narrower FY21F net loss of RM318.6mil and a FY22F net profit of RM501.3mil (vs. net losses of RM475.6mil and RM500.8mil previously). We keep our fair value relatively unchanged at RM6.65 based on 22x revised FY22F EPS. This is at a discount to the FY22F P/E of 71x of its peer, Airports of Thailand (AoT), to reflect Malaysia’s smaller tourism market vs. that of Thailand, and a higher operating risk of MAHB’s Sabiha Gokcen International Airport (ISG) in Istanbul, Turkey. Maintain BUY

• MAHB's FY20 core net loss of RM530.1mil (after excluding one-off items such as impairment on intangible assets and impairments on receivables) came in narrower than expectations, vs. our full-year net loss forecast of RM704.5mil and the full-year consensus net loss of RM680.2mil. We believe the variance against our forecast came largely from better cost savings and deferred tax assets.

• MAHB's FY20 revenue fell by 64% YoY on the back of a 70% contraction in passenger movements amidst low air travel demand due to Covid-19 restrictions. In terms of cost, it achieved 26% core operational costs savings (vs. its target of 20%–22%) via efforts such as reducing staff costs and cutting utilities & maintenance costs.

• Key takeaways from its analyst briefing are as follows:

1. It expects its core operational expenses to rise by 6% in FY21F (led by maintenance expenditure), with other operational expenses to have minimal increase, thanks to its ongoing containment effort.
2. It will spend RM400mil capex in FY21F, mainly for upgrading its baggage handling system, the Aerotrain track transit system, and KLIA’s pavement rehabilitation. This compares with RM190mil in FY20 (deferring more than RM1.5bil of development capex for the year to conserve cash), mainly used for network refurbishment and runway 3 rehabilitation.

Source: AmInvest Research - 1 Mar 2021