• We maintain BUY on Malaysia Airports Holdings (MAHB) with an unchanged fair value (FV) of RM8.04/share, pegged to FY24F PE of 19x which is 1 standard deviation below its 2-year FY18–FY19 pre-pandemic average of 22x.

• Our FV also incorporates a 3% premium to account for an unchanged 4-star ESG rating, underpinned by the group’s initiatives to increase the usage of renewable energy.

• We made no changes to our earnings forecasts as MAHB’s 1HFY23 core net profit (CNP) of RM226mil came in within expectations, making up 49% of our FY23F earnings and 52% of street’s.

• QoQ, 2QFY23 revenue rose 19% while CNP surged 75%. This was mainly due to the increase in passenger volume driven by resumption of airline services and connectivity, reopening of China’s borders, increase in Haj pilgrim's quota and the recognition of RM62mil marginal cost support (MARCS) passenger service charge (PSC) for 2022 upon receiving the eligibility criteria waiver from the government.

• The near-term rerating factor remains to be the impending finalisation of the costbased regulated asset base (RAB) framework, which provides long-term earnings visibility. Meanwhile, potential airport expansions in Malaysia, the development of KLIA Aeropolis and Subang Airport Regeneration Plan are expected to further propel the group’s growth momentum over the longer term.

• MAHB’s earnings outlook remains promising and is on track to return to the black in FY23F premised on the recovery in air travel and tourism sectors as the pandemic comes under control with international borders reopening globally.

• The stock currently trades at an attractive FY24F PE of 17x, which is lower than the peak of 27x in the 2-year (FY18–FY19) pre-pandemic period.

Source: AmInvest Research - 25 Aug 2023