Highlights/ Comments

• MAHB, through its subsidiary Malaysia Ai rports Consultancy Services Middle East LLC (MACS ME) had received the Letter of Award and Notice to Proceed for the provision of Facility Management Services for NDIA Project Office, NDIA Mock-up Warehouse and Associated Facilities at the NDIA Steering Committee Project Office in Doha, Qatar.

• MACS ME was established through 2 shareholders; Watad Group and MACS with 51% and 49% of ownership respectively with paid up capital of QAR200k (RM198k).

• The project amounted at QAR23.9m (RM23.6m). Further, the project commenced since 1st April 2015 and will take 3 years to complete. Based on 15% margin, we estimate this project will have cumulative RM3.54m net profit. (RM885k for FY15, RM1.18m for FY16 and FY17, and RM303k FY18).

• Despite the relatively insigni ficant contribution from this project (circa 0.28% of net profit ), we are positive on the news as this shows MA HB’s commitment in provi ding sustainable growth for its shareholders and diversifies its future earnings.
• Despite the current consumer sentiment (Post -GST), we expect it to be a short term setback and remained upbeat about MAHB’s long term prospect (Improvement of air travelling demand, Return of British Airways, ANA Airways arrival, and SGIA break-even).

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 t raffic 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 RM7.70 based on SOP.

Source: Hong Leong Investment Bank Research - 29 Apr 2015