Results

Below expectations - Reported 4Q13 core net profit of RM57.2m, taking FY13 profit to RM375.2m (ex-construction) vs. HLIB’s FY13 forecast of RM444m and consensus RM445.6m.

Deviations

1) RM43m losses recognition from Sabiha Gokcen associate after MAHB provided financial guarantees to Sabiha Gokcen; 2) RM50m increase in 4Q13 staff cost, as MAHB provided higher bonus payout; and 3) higher than expected airlines incentives expenses at RM76m vs. previous guidance of RM65m.

Dividends

None.

Highlights

FY13 revenue increased by +15.6% yoy (excluding Construction: +13.9% yoy) on stronger construction revenue and strong passenger movement due to aggressive domestic airlines (MAS, AirAsia & Malindo) expansion and load active strategy.

Recognized airline rebates of RM75.9m in FY13 (vs. RM65m in FY12). We expect the amount to reduce in FY14 due to higher base effect of 2013.

Excluding construction, EBITDA margin dropped to 35% from 40%, due to higher staff expenses, full recognition of government user fees, as well as utility charges.

Management is expected to book another RM200-300m cost in 1Q14 for related KLIA2 construction, on top of the current RM4bn. The investment tax allowance has been set at 60% of capital spent on KLIA2 and tax deduction only applicable to KLIA2’s taxable income.

In addition to the RM69m provisions on MALE (4Q12), MAHB incurred another RM3.7m for arbitration cost, and expect further RM5m in 1Q14.

MAHB is expected to complete the acquisition of 40% of ISGA by mid-2014, which MAHB may need to recognize further losses from ISGA. However, MAHB is confident ISGA will turnaround by 2015.

Risks

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

Forecasts

Unchanged for FY14-15, and introduced FY16 earnings at RM680m.

Rating

BUY

Positives –

• Monopoly of airports operation in Malaysia (except Senai)
• Main beneficiary of strong air traffic into Malaysia and 2014 Budget, in line with government initiatives to boost tourism sectors i.e. VMY 2014.
• Unaffected by high jet fuel cost and RM depreciation.
• Potentially higher non-aeronautical revenue.

Negatives –

• Low liquidity.

Valuation

We remained positive on MAHB and maintained BUY with unchanged target price of RM9.75.

Source: Hong Leong Investment Bank Research- 28 Jan 2014