Malaysia’s largest airport operator. Being one of the largest airport operators in terms of total number of passengers handled, Malaysia Airports Holding Berhad (AIRPORT) operates and manages 39 airports, including 5 international airports, 17 domestic airports, and 17 STOLports. The group also owns and manages one international airport in Istanbul, Turkey. Bulk of the group’s revenue is derived from airport operations (95% of FY21 revenue), which include the passenger service charge income (charged to departing passengers) and parking & landing charges income (charged to the airlines). Non-airport operations, which consist of project and repair management, hotel, and others, accounted for the rest.

Riding on the gradual reopening of borders globally. We continue to like AIRPORT for being a beneficiary of the gradual reopening of borders worldwide. The easing of international travel protocols and relaxation of the entry procedures globally bodes well for air travel demand, benefitting AIRPORT via higher passenger movements. Given the pent-up demand for air travel following Malaysia’s reopened international border in 2Q22, Malaysian-based airlines have been re-instating their capacity with increased frequency and new routes introductions.

As of August, domestic capacity has improved to 66.4% of the pre-pandemic level and is anticipated to reach 75% by end-2022. Similarly, international capacity has also recovered strongly to 41.4% of the pre-pandemic level (countries like Japan and China’s international borders remain closed in that period), this is anticipated to improve to >60% by end-2022 in light of higher international travel traffic as more countries reopen their border and further relax travel restrictions. International airlines have been increasing capacity to Malaysia: e.g. Turkish Airlines recently launched three additional flights per week between Istanbul and Kuala Lumpur starting from Oct 1, increasing the frequency to 10 times weekly.

Grossly oversold. Technically, AIRPORT is grossly oversold and with indicators on the mend. A successful breakout above RM5.80 will spur greater upside toward RM6.00- 6.14-6.47. Cut lost at RM5.32

Source: Hong Leong Investment Bank Research - 7 Oct 2022