News    Malaysia Airport (“AIRPORT”) announced that its wholly-owned subsidiary, MACS had received a letter of award from the New Doha International Airport Steering Committee (NDIA Steering Committee) for the provision of facility management services for airport operational facilities and ancillary building at the New Doha International Airport for a total sum of RM83.3m for a period of 3 years. 

Comments    We are surprised with the award as we had not been expecting any external contracts awards for AIRPORT. We view the award positively for AIRPORT, especially since it has the option to extend for a further three years at a price of QAR108.7m (equivalent to RM90m) to be exercised on the discretion of the NDIA Steering Committee. This will possibly open up more opportunities in the development, operation and management of airport overseas for AIRPORT.

The scope of works includes the consultation service for comprehensive facilities management, interim security services and custodial and janitorial services for the various airports operational facilities and ancillary buildings at NDIA. Based on our conservative net margin assumption of 10% for the project, it could possibly contribute c.RM8m to AIRPORT’s bottom line for the next three years. 

Outlook   AIRPORT’s outlook remains intact as the traffic number continues to grow healthily coupled with the fact that the opening date for KLIA2 has been finalised and set for operations on the 2 nd of May  2014. 

Forecast    No changes to our earnings estimate at this juncture as the above project is not material yet to AIRPORT earnings.  

Rating   Maintain OUTPERFORM

AIRPORT remains our Top Pick for the Aviation industry on the back of its diversified earnings and better airport traffic from the increasing competition between the low-cost carriers.

Valuation     We are keeping our TP of RM6.60 based on SOP, implying a PER of 18x on our FY14E EPS.

Risks    A significant drop in passenger numbers due to catastrophic events.

Source: Kenanga