Malaysia Airports; Hold; RM6.10
Price Target: RM6.05; MAHB MK

MAHB announced that the contractors for klia2’s terminal building (UEMC-Bina Puri JV) have confirmed that the completion date will be 30 April 2014. This is inclusive of securing the Certificate of Completion and Compliance (CCC) and Operational Readiness & Airport Transfer (ORAT) as per the contractual obligations. Based on the revised completion date by the contractors, MAHB targets to open klia2 for operations on 2 May 2014.

MAHB added that liquidated ascertained damages (LAD) will be enforced according to the contractual obligation of respective contractors. MAHB earlier announced that LAD of RM199,445.40/day was invoked beginning 16 June 2013. Based on the new completion date, the total LAD would amount to RM64m.

The Financial Daily reported that the contractors had requested for extension of time due to the various design changes including variation works on the baggage handling system and unexpected ground conditions which required additional piling and temporary sheet pile. Given the reported design changes, the amount of LAD to be recognized remains to be seen.

We lift our FY13-14f net profit forecast by 26%/14% given our earlier more conservative assumptions on depreciation and amortization for klia2. In the near term, we expect share price upside to be capped by valuations. In the longer term, the Group’s prospects will be underpinned by greater passenger growth and acceleration in non-aeronautical earnings with the opening of klia2, and value-enhancing development of land surrounding the airport. Maintain Hold with SOP-based TP of RM6.05.

Source: HwangDBS Research - 19 Jun 2013