Highlights/ Comments

• Total KLIA and MASB drop by -1.0% (due to high base in February 2014). International pax movement drops by 4.0% but domestic pax movement increased by 2.0%

• Overall, MAHB’s Feb pax movement went up by 1.9% yoy, on the back of stronger Istanbul ISGA pax movement which saw a 14.2% yoy growth, translating into 81% load factor, inline with our Istanbul ISGA forecast growth of +16.82% yoy (vs. YTD: +15.7% yoy).

• We note that Chinese sector continued to experience double digit drop in Feb 2015, after MH370 incident in Mar 2014. Nevertheless, Europe sector grew by 3.3% and South Asia sector also experienced double-digit growth.

• We remained optimistic on the aviation outlook with Feb stats showing improvement in overall traffic vs. Jan’s -4.6% yoy (post QZ8501 incident in Dec 2014). We maintained our pax movement growth forecast at 4.9% for 2015.

Risks

• World crisis (ie. war, tourism and epidemic outbreak); Cost overrun and operation disruption in KLIA2; Development of high speed train between Singapore and Malaysia; Major movement of airlines from KLIA to KLIA2.

Forecasts

• Unchanged.

Rating

BUY

Positives

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

Negatives

• Low liquidity; and
• Short-term impact on traffic following air incidents.

Valuation

• Maintained BUY with unchanged target price of RM8.30 (RM7.70 ex-rights) based on SOP.

Source: Hong Leong Investment Bank Research - 11 Mar 2015