MAHB recorded a turnaround in 4QFY22 with PATMI RM24.2m (vs. -RM18.0m in 3QFY22; -RM184.2m in 4QFY21), lowering FY22 LATMI to -RM228.1m (vs. -RM888.0m SPLY). The results was within our expectation (101.7%), but below consensus. We expect a full year turnaround in FY23, supported by the continued traffic improvement in Malaysia and ISGA. MAHB has resumed its dividend payout in 4QFY22 with 3.91 sen/share. Maintain BUY with an unchanged TP of RM7.75.

Within expectation. MAHB recorded a turnaround to PATMI +RM24.2m for 4QFY22, reducing FY22’s LATMI to -RM228.1.m. The results was within our expectation (101.7%), but below consensus of -RM148.3m. EIs include positive Force Majeure Relief of EUR115m (RM539.9m) from Turkey government, support ISGA’s operation during the pandemic (recognised in 4QFY22), partially offset by net write offs (RM15m), forex loss (RM29.8m), RM72.2m deferred tax (mainly from ISGA in 4QFY22) and RM60.0m higher staff costs allocation of in 4QFY22.

Dividend. Declared a final dividend of 3.91 sen/share (details to be announced on a later date) with Dividend Re-investment Scheme.

QoQ. Turnaround to PATMI RM24.2m in 4QFY22 (vs. -RM18.0m in 3QFY22), driven by continued traffic improvement and better passenger mix in Malaysia, partially offset by the seasonal weaker performance of ISGA operations on lower traffic (see Figure #3) and higher operating costs on inflationary pressure.

YoY. PATMI RM24.2m in 4QFY22 (vs. -RM184.2m in 4QFY21), driven by traffic improvements for both Malaysia (post international border reopening effective 1 Apr 2022) and ISGA operations, which contributed to higher group revenue and EBITDA.

YTD. Core LATMI improved to -RM228.1m (vs. -RM888.0m SPLY) due to low base effect, affected by lockdown measures SPLY. The improvement was driven by: (i) higher passenger movement traffic; (ii) improved international passenger mix (higher tariff and retail spending); and (iii) continued strict control of cost structure.

Malaysia. Malaysia operation is expected to continue performing in FY23 as more airlines reinstate capacities to cater for the robust air travel demand especially with the recent reopening of China, Taiwan, Japan and Hong Kong. MAHB has guided network capacity to reach 79% of 2019 by the end-2023 based on current airlines planned schedule. Previously guided to return to profitability in FY23 at RM400-500m despite traffic recovery of 70% as MAHB continues to improve margins with ongoing cost-optimization measures. Management also highlighted the recently approve d Operating Agreement will allow MAHB to move forward with the development of Subang Airport hub and the long delayed expansion of Penang International Airport, with certainty of returns.

ISGA. On the other hand, management expect ISGA traffic to exceed pre-pandemic level in FY23 with continued strong international mix, based on current flight schedules. Nevertheless, the higher inflationary costs as well as recent earthquake in Turkey may post uncertainty towards ISGA’s performance in the near term.

Forecast. Unchanged.

Maintain BUY, TP: RM7.75. Wemaintain BUY recommendation with unchanged TP: RM7.75 as we remain positive on MAHB turnaround in FY23, leveraging onto the recovery of air travel as countries relax their border restrictions while airlines are reinstating their capacities back to pre-pandemic levels.

Source: Hong Leong Investment Bank Research - 1 Mar 2023