Highlights

Based on statistics released by MAS’ and MAHB’s FY13 results, we believe Brahim’s FY13 topline results (to be released on 27th Feb) will be within expectations.

MAS total passengers carried in FY13 experienced doubledigit growth of 28.5% to 17.2m passengers (Figure 1) compared to 13.4m in FY12 (vs. HLIB’s yoy growth estimates of 30%).

Besides, based on the total costs incurred by MAS on services provided by Brahim’s in 4QFY13 and FY13, this translates to circa. RM386.4m in revenue for Brahim’s in FY13. It would be in line with our estimate of RM391.3m (+1.3%).

On the other hand, MAHB’s FY13 passenger movement statistics (Figure 2) of 47.5m passengers is within expectation as well, accounting for 101.6% of our FY13 estimates.

However, Brahim’s could potentially record stronger bottomline earnings as operations’ efficiencies increases on the back of higher numbers of meals catered. Furthermore, Brahim’s have always been putting in efforts to reduce its expenses, especially finance costs.

As such, we would not be surprise if Brahim’s core earnings released on 27th Feb 2014 to be above expectations. As to other business segments (i.e: Café Barbera and warehouse/logistics division), we do not see any major changes/shifts in the upcoming results release.

Risks

• Pandemic outbreaks.
• Slowdown in passenger movements.
• Termination of concession agreements.
• Relatively elastic demand.
• Appreciation of US$ and/or depreciation of RM.

Forecasts

Unchanged.

Rating

BUY

Positives – (1) Niche industry; and (2) Sustainable earnings from long-term concession agreements.

Negatives – (1) Earnings highly dependable on economic conditions/pandemics; (2) Delay in the opening of KLIA2 and sugar refinery plant in Sarawak; and (3) Additional borrowings for any asset injections could increase net gearing significantly.

Valuation

Maintain BUY with unchanged TP of RM2.64 based on industry average of 16x FY14’s EPS and 7.0x FY14’s EV/EBITDA.

We strongly believe that the recent selldown is largely due to profit taking among investors and hence provide opportunity to accumulate.

Source: Hong Leong Investment Bank Research - 25 Feb 2014