Fair Value Gains

MAHB’s 1Q18 results were a positive surprise. Core net profit doubled yoy to RM146m, driven by strong passenger growth. A net exceptional gain of RM299m, mainly unrealised gains for its overseas investments, boosted its bottom line. We lift our FY18-20E EPS by 14-19% to reflect the higher-than-expected exceptional gain in FY18 and lower-than-expected cost increase. Uncertainties in the proposed regulated asset base (RAB) framework will likely continue to dampen sentiment on the stock. We reiterate our HOLD call with a slightly higher DCF-based TP of RM9.20.

Positive Surprise

MAHB’s 1Q18 results were above market and our expectations. Core net profit jumped 101% yoy to RM146m in 1Q18, driven by stronger revenue growth outpacing the increase in operating expenses. Revenue increased 11% yoy to RM1.22bn, driven by passenger growth of 3.4% yoy in Malaysia and 18.2% in Turkey. Net profit of RM445m exceeded the consensus fullyear forecast of RM384m and comprises 74% of our previous estimate of RM600m. It jumped 5.8-fold yoy on a net exceptional gain of RM299m and better operating performance. There was an unrealised gain on the fair value of investment in GMR Hyderabad International Airport (RM258.4m) and gain on disposal of GMR Male International Airport (RM28.2m).

Turkey Remains a Drag

Revenue for the Malaysian operation increased 8% yoy while that for Turkey jumped 22% yoy. Net profit for the Malaysian operation increased 2.3-fold yoy to RM510m in 1Q18, which includes the exceptional gains. Excluding the unrealised gains, core net profit for the Malaysian operation was RM223m (+45% yoy). The Turkey operation remained in the red with a net loss of RM65m (narrowed by 26% yoy) in 1Q18, as high depreciation and finance costs wiped out the positive EBITDA. Higher staff costs with increments and bonuses could hold back earnings growth in 2Q18.

Maintain HOLD With Higher 12-month TP of RM9.20

We lift our 2018-20E EPS by 14-19% to reflect MAHB’s cost control measures, and raise our DCF-based TP accordingly to RM9.20 from RM9.00. We maintain our HOLD call.

Source: Affin Hwang Research - 29 May 2018