Results

Above expectations - Reported 2Q13 core net profit of RM84.9m, taking FY12 profit to RM191.3m (ex-construction) vs HLIB’s FY13 forecast of RM370.6m or 51.6%.

Deviations

The delay in commencement of KLIA2 to May 2014 (from June 2013).

Dividends

None. MAHB usually declare dividend in 2H. We expect continuous DRP scheme, which has received good response of 85% acceptance during FY12 final dividend.

Highlights

1H13 Revenue increased by +36.8% yoy (excluding Construction: +12.4% yoy) mainly on stronger construction revenue, as well as strong passenger movement growth of +13.6% yoy.

MAHB is currently in discussion with the government on the implementation of higher airport charges of 10% (as stipulated in the Operation Agreement) by 1Q14. Any shortfalls from the amount will be compensated by the government to MAHB under MARCS.

Recognized higher airline rebates in 2Q13 of RM18m (strong passenger growth from MAS) vs. 1Q13’s RM13.2m.

Start recognizing full government user fee expense (previously only half of the amount) in 2Q13 of RM82.4m in income statement, after MAHB has settled the Balance Residual Payment to Government in April 2013 (part of the restructuring agreement).

We expect near term EBITDA margin to decline to 35% from 40% level (excluding Construction segment) due to the higher user fee expenses as well as higher operational cost of KLIA2 (low utilization rate), despite the higher revenue from commercials and airport charges.

Discussion is still underway on the concession extension of KLIA2, amortization rate of KLIA2, approval on Investment Tax allowance and capital allowance. MAHB is positive with the current development of the discussion.

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 our model and increased earnings for FY13 by 10.0% and FY14-15 by 1.6% and 2.7% respectively, after accounting for the delay in KLIA2 commencement (delay in high startup cost) and higher passenger growth.

Rating

BUY

Positives –

• Monopoly of airports operation in Malaysia (except Senai)
• Main beneficiary of strong air traffic into Malaysia, inline with government initiatives to boost tourism sectors.
• Potentially higher non-aeronautical revenue.

Negatives –

• Low liquidity.

Valuation

Maintain Buy with higher Target Price of RM7.72 (from RM6.80) based on DCFE.

Source: Hong Leong Investment Bank Research - 24 Jul 2013