Results

Reported 1Q13 core net profit of RM106.4m (excluding construction profit of RM19.7m), meeting 29.5% of HLIB’s FY13 forecast of RM360.8m and 30.2% of consensus’s RM352.5m. We expect lower earnings in 2H13 when KLIA2 commence operations (high startup cost).

Deviations

Largely inline.

Dividends

None.

Highlights

Revenue increased by +56.2% yoy (excluding Construction: +12.0% yoy) on the back of: 1) +8.7% yoy passenger growth; 2) +10% yoy aircraft landing and parking charges; and 3) +210.1% yoy construction revenue. LCCT passenger increased by +6.7% yoy vs. Main Terminal’s +15.3% yoy.

Recognized lower airline rebates program with RM13.2m in 1Q13 (vs. RM20.3m in 1Q12). Management is expecting RM60m in FY13 vs. RM65m in FY12.

Staff cost increased 21.3% yoy to RM111.7m due to bonus payouts in 1Q13, additional recruitments, salary adjustments for executives and average salary increments of 3-6%.

Excluding construction’s contribution, MAHB’s EBITDA margin is maintained at healthy level of 40%. However, the margin will be affected when KLIA2 commencement operations (high startup cost).

Management was unable to commit on the date of KLIA2 commencement, indicating possibility of delay (minor impact to our DCFE valuation). KLIA2 needs to undertake system preparations for 2-3 months upon construction completion. MAHB had already spent ~RM3bn for the project.

We expect KLIA2’s revenue to offset the high startup cost, while any construction cost-overrun will be amortized over the subsequent concessionaire period.

MAHB still have RM1bn bank standing facility (short term loan arrangement) to fund the remaining KLIA2 construction cost. MAHB will have to raise new loan to refinance the standing facility. The additional RM1bn loan will increase gross gearing to 0.93x, within sukuk covenant of 1.25x.

Risks

World crisis (ie. war, tourism and epidemic outbreak), delay in the completion of KLIA2 and the development of high speed train between Singapore and Pulau Pinang.

Forecasts

We have fine-tuned FY13-15 earnings by +2.7%,-2.6% and -4.8% respectively, after imputing relevant information from 2012 annual report.

Rating

BUY

• Positives – 1) Monopoly of airports operation in Malaysia (except Senai); 2) Main beneficiary of strong air traffic into Malaysia, in line with government initiatives to boost tourism
• Negatives – Low liquidity.

Valuation

• Maintained Buy at higher target price of RM6.80 (previously RM6.52) based on DCFE. We remained positive with MAHB on strong passenger growth from new (Malindo) and existing airlines (MAS and AirAsia).

Source: Hong Leong Investment Bank Research - 29 Apr 2013