Highlights/ Comments

• In September, MAHB registered a total passenger growth of +6.5% yoy, with Malaysia operation at +1.1% yoy and Istanbul ISGA operation at +22.5% yoy. Notably Malaysia operation was affected by MAS capacity rationalization, RM depreciation (less travels by the locals) as well as haze situation (affecting travels especially within Peninsular).

• KLIA-MTB remained drag down by capacity rationalization of MAS. KLIA2 continued to record strong growth at +15.2%, driven by LCC operations - AirAsia Group (including AirAsia X) and Malindo.
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• On a positive note, China sector continued to show improvements since May with an average growth of +18.8% yoy. Similarly, Middle East also reported positive growth, while Europe sector was affected by MAS restructuring.
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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;

Forecasts

• Unchanged.

Rating

BUY

Positives

• Monopoly of airports operation in Malaysia (except Senai ); and Main beneficiary of strong air traffic into Malaysia, in line with government initiatives to boost tourism sectors.

Negatives

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

Valuation

• Maintained BUY with unchanged TP: RM6.79 based on DCF.

Source: Hong Leong Investment Bank Research - 13 Oct 2015