Results

• Below Expectations - Reported core profit of RM51.1m for 4Q17 and RM227.0m for FY17 (excl. EIs, distributions to Sukuk holders RM57.5m and deferred tax gain RM67.2m for ISGA & LGM), made up 82.8% of HLIB FY17 forecast and 83.5% of consensus. Management has made additional provision of 1 month bonus for its employees, accounting for c.RM40m in 4Q17 (we deem this item as one-off).

Deviations

• Higher than expected tax for M’sia operation and higher operation costs and financing expenses for ISGA operation, partially due to 2 years extension of concession into 2032.

Dividends

• Proposed final dividend of 8.0sen, bringing FY17 dividend to 13.0sen, higher than our expectation of 12.0sen.

Highlights

• YoY: Group bottom line was RM51.1m in 4Q17 lower than RM68.9m in 4Q16, due to accounting adjustments for lower depreciation and amortization charges in 4Q16 post 35 years concession extension for Malaysia operation.

• QoQ: Group core earnings declined by 25.9%, being dragged by higher tax expenses for M’sia operation and seasonally weaker 4Q in ISGA operation.

• FY17: Group’s core earnings improved to RM227.0m (vs. RM82.5m in FY16) on the back of higher passenger traffic, driving up both aeronautical and non-aeronautical revenue.

• Malaysia: Expect continued earnings improvement in Malaysia, leveraging on the healthy air travel growth. The improving passenger mix from international segment will further boost both aeronautical and non-aeronautical revenue. The development of KLIA-Aeropolis is expected to further enhance MAHB earnings in the longer term.

• Turkey: ISGA is expected to turnaround in 2018, riding on the expected stronger traffic flow. Its 8mppa capacity expansion is expected to complete in 2H18, in time for the peak summer travelling season. The concession extension for additional 2 years ending 2032, will result lower earnings due to higher financial expenses on the additional user fees.

• CAPEX : Management guided capex to increase to c.RM750m in 2018, inclusive of ISGA expansion of c.RM100m. MAHB is in talks with government to recoup c.RM140m through lower user fees.

Risks

• World crisis (i.e. war, terrorism and epidemic outbreak), shutdown of airport terminals and the development KL-SG HSR.

Forecasts

• Unchanged.

Rating

BUY ( ↔ )

• MAHB is expected to be the major beneficiary from the growth of air travel demand in Malaysia as well as on-going land development initiatives (under KLIA Aeropolis Masterplan). The recovery of ISGA traffic has improved ISGA outlook and potential monetizing of ISGA investment will unlock ISGA valuation.

Valuation

• We maintain our BUY recommendation with unchanged TP: RM10.00 based on DCFE.

Source: Hong Leong Investment Bank Research - 22 Feb 2018