Continued core loss in 1QFY21 at -RM243.4m, which was within HLIB’s expectation (22.3%) but below consensus (45.4%). Both Malaysia and Turkey operations remain in the red during the quarter. Recent surge in new cases and implementation of stricter lockdown measures has raised concern of a near term recovery. Nevertheless, we do not expect liquidity issues with MAHB as the group still has RM1.6bn cash in hand with RM3.2bn undrawn credit facilities. Maintain SELL with adjusted TP: RM4.88 (from RM4.85) based on SOP, as we adjusted our forecasts.

Within expectation. MAHB recorded core LATMI of -RM243.4m for 1QFY21 which was within HLIB’s forecast (22.3%), but below consensus (45.4%). We expect continued losses for the remaining quarters of the year as MAHB’s operational countries record surging cases and governments have again implemented strict movement controls.

QoQ. Despite the lower passenger throughput of -15.3%, MAHB managed to lower core LATMI to -RM243.4m (from -RM305.9m in 4QFY20), mainly due to on-going group cost containment measures (mainly staff costs) amounting to RM30-40m being implemented.

YoY. Recorded LATMI of -RM243.4m (vs. PATMI RM26.0m in 1QFY20), mainly due to the steep drop in passenger traffic in MAHB (-92.8%) and ISGA (-39.3%) affected by full quarter impact of Covid-19 and country lockdown measures in both Malaysia and Turkey during the quarter as compared to partial impact in 1QFY20.

FiT plan. Management revealed a new 5 year strategy and transformation plan “Future F.I.T” to focus on building capacity and capabilities today to capture opportunities post pandemic. Phase 1 of the plan (2021-2022) is aimed at MAHB’s survival (mainly on liquidity management) and recovery; and Phase 2 (2023-2025) is aimed at growth and transformation.

Liquidity. MAHB’s liquidity remains intact with RM1.6bn cash in hand (included RM0.7bn in ISGA) with available RM1.8bn undrawn sukuk and RM1. 3bn revolving credit. Management has been holding tight onto its cash expenses for Malaysia operations with no debt payments scheduled for 2021. On ISG front, the concession payment of EUR114.8m (RM560m) due in Jan 2021 has been deferred indefinitely and EUR 10m (RM49m) for ISG debt payment deferred to Dec 2021. ISG is also requesting for rebates for concession payments (to Turkey government) for FY20-21.

Outlook. The recent surge of cases in Malaysia and Turkey has again raised concerns of air travel recovery in the near term with governments have again implemented strict lockdown measures. Nevertheless, MAHB is cautiously optimistic for a strong recovery of Malaysia air travel demand when the population achieves an inoculation rate of 80% (target) by early 2022.

Forecast. We cut expected losses for FY21 by 14.0% on assumed tax credit, but widened losses for FY22 by 31.4% on assumed slower recovery. We expect turnaround in FY23 earnings at +RM372.2m.

Maintain SELL, TP: RM4.88. We maintain SELL recommendation with adjusted TP: RM4.88 (from RM4.85) based on SOP (from DCFE). MAHB is expected to remain in the red in the near term, as the hopeful recovery of air travel remains a concern. Nevertheless, management has secured enough liquidity until 2021-2022

Source: Hong Leong Investment Bank Research - 31 May 2021