Continued core loss in 4QFY21 at -RM212.4m, dragged FY21 to -RM930.0m, slight above HLIB’s expectation (91.3%) but slight below consensus (109.5%). While we expect continued traffic improvement in Malaysia and ISGA, there is still risk of loss-making given traffic recovery is mainly driven by lower margin domestic travel with ASEAN border re-opening may still be at nascent stage. Maintain HOLD with unchanged TP: RM6.00.

Above expectation. MAHB recorded core LATMI of -RM212.4m for 4QFY21, which further dragged FY21 to -RM930.0m. We deem the result slightly above our expectation of LATMI -RM1.0bn (91.3%), but marginally below consensus’ LATMI -RM848.9m (109.5%). EIs of RM106m for FY21 include recoupment of charges from Segi Astana (RM50m in 4QFY21), inventories write-back, write-back of doubtful debts and deferred tax gain from ISGA.

QoQ. The recorded core LATMI -RM212.4m in 4QFY21 was flattish QoQ (-RM212.7m in 3QFY21), as the improvements in ISGA operation (due to lower RM40m finance cost recognized in relation to the continued deferment of airport utilization fee) was offset by the higher losses in Malaysia operation (following higher D&A charges).

YoY. Core LATMI of -RM212.4m in 4QFY21, improved YoY from -RM305.9m in 4QFY20, mainly due to higher passenger movement traffic as both Malaysia and Turkey (ISGA) implemented less restrictive travel requirements.

YTD. Recorded core LATMI of -RM930.0m, a deterioration from -RM876.4m in FY20, mainly due to longer strict lockdown period in Malaysia during the year, which was partially offset by the recovery in ISGA operation, following less restrictive travel control requirements in Turkey.

Malaysia. The continued relaxation of travel restrictions and acceleration of vaccination measures in Malaysia as well as opening up of international borders under VTL/TCA with other countries (deemed safe with high vaccination rate), have provided hope for a recovery in air travel demand in 2022. MAVCOM forecasted passenger movement to reach 32.6-49.0m (30-45% of 2019’s traffic), driven predominantly by domestic and ASEAN travel. Management is well prepared in restructuring its retail commercial offerings, which will encourage higher average spending as travel resumes in FY22. However, we expect the recovery of ASEAN travel to only gradually pick up as some form of restrictions would still be in place at initial stage.

ISGA. ISGA has also shown a strong passenger movement recovery since mid-2021, achieved 89.6% of 3Q19 and 84.5% of 4Q19 share of traffic. Management does not expect material impact from current Russia-Ukraine crisis, as these countries only contribute c.10% of the airport’s traffic, which is predominantly domestic, Asian, Middle East and Western Europe.

Dividend. Management reaffirmed its existing 50% payout policy. Should MAHB turnaround in FY22, management is exploring potential share dividend re-investment scheme (up to 10% discount) in order to conserve cash.

Forecast. Unchanged.

Maintain HOLD, TP: RM6.00. We maintain HOLD recommendation with unchanged TP: RM6.00. While we believe the worst should be over with boarders generally reopening, a full return to normalcy still seems distant, coupled with the ongoing risk from the highly transmissible Omicron variant.

Source: Hong Leong Investment Bank Research - 1 Mar 2022