Highlights

• / Comments

• In April, Malaysia traffic recorded a positive growth of 1.7%, on the back of stronger growth from MASB Airports at 4.2%, compared to a flat growth for KLIA. YTD, pax movement dropped by 0.5% yoy due to high base effect. Istanbul ISGA pax movement recorded another strong double digit growth at 14.64%; bringing YTD growth to 16.13% (HLIB’s projection 16.82%).

• The decline in China sector has slowed to circa 5% in April from double digit decline in 1Q15. Similarly, Middle East sector has also improved while South Asia registered strong growth at 13.7%.

• On the recent Earthquake tragedy which hit Nepal, we do not expect significant impact for MAHB, since Nepal only contributes circa 2% of Malays ia’s total International traffic.

• With the coming General Elections in Turkey by June, management is expecting lower international passenger growth in ISGA, but likely to be offset by higher domestic passenger growth.

• We remained optimistic on the aviation outlook with Apr stats showing improvement in overall growth and maintained our pax movement growth forecast at 4.9% for 2015. We expect positive growth from May onwards due to low base effect.

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

• Under Review

Rating

• 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

• Under Review, with previous call of BUY and target price of RM7.70 based on SOP.

Source: Hong Leong Investment Bank Research - 15 May 2015