MAHB reported 3Q17 revenue of RM1.21bn (+13% yoy) and net profit of RM79.7m (+628% yoy). The strong earnings performance was supported by robust passenger growth in Malaysia (+10.2% yoy in 9M17) and Turkey (+4.0% yoy in 9M17). Non-aeronautical revenue also experienced doubledigit growth (+13.9% yoy in 9M17), mainly driven by improved retail and F&B sales per pax and higher rental fee. 9M17 earnings constitute 81-89% of consensus and our previous forecasts. We cut our 12M DCF-based TP to RM8.80 after imputing higher cost assumptions. Maintain HOLD.

Strong Revenue Growth

MAHB recorded double-digit revenue growth in 3Q17, mainly attributable to higher revenue from both airport and non-airport revenue. Airport operations recorded revenue of RM1.14bn in 3Q17 from better-than-expected passenger growth in Malaysia, resulting in higher PSC revenue. Higher international passenger growth in Turkey also supported the strong revenue growth in airport operations. Overall revenue from non-airport operations increased by 4.4% yoy in 3Q17 (RM75.7m), mainly driven by higher revenue from hotel operations and agriculture & horticulture. This note marks a transfer of analyst coverage.

Net Profit Increased by >100% Yoy for 9M17

The Malaysian operations recorded higher PBT of RM282.9m, largely attributable to the lower amortisation arising from the extension of the Operating Agreement. However, operating expenses increased 15.3% yoy in 3Q17 due to higher costs including staff costs, maintenance and utilities costs. Revenue and net profit grew 10.1% yoy and 460.8% yoy respectively in 9M17. Both Malaysia and Turkey operations experienced higher EBITDA of 12.3% yoy and 8.1% yoy on the back of stronger international passenger growth. We raise our FY17E EPS by 21% to reflect higher-than-expected passenger growth. But cut FY18- 19E EPS by 4% to reflect higher operating cost assumptions.

Maintain HOLD With Lower TP of RM8.88

MAHB recorded strong earnings in 9M17, underpinned by strong passenger growth. We cut our DCF-derived 12-month TP to RM8.80 from RM 9.10 as we assume higher operating expenses, especially for its Turkey operation. Maintain HOLD.

Source: Affin Hwang Research - 27 Nov 2017