Period

1Q16

Actual vs. Expectations

Malaysia Airports Holdings (AIRPORT) registered core net profit (CNP) of RM2.2m, accounting for 73% and 2% of our and streets’ full-year estimates, respectively. It was above our expectations but came way below street’s estimate.

The positive variance versus our expectation is mainly due to the lower-than-expected finance costs in 1Q16.

Dividends

No dividend declared, as expected.

Key Results Highlights

YoY, it registered CNP of RM2.2m for 1Q16 which is a major improvement vis-à-vis the losses of RM45.6m incurred in 1Q15, underpinned by a strong revenue growth of 16%. The stellar revenue growth was driven mostly by its business segments on higher passenger growth.

QoQ, on the contrary, its 1Q16 CNP saw a sharp decline of 90%, attributable to a softer revenue (-2%) coupled with a higher staff cost of 9%. That said, it also enjoyed a positive tax break in 4Q15 due to the losses incurred for all the provisioning accounted for previously.

Outlook

Recently, they announced a 5-year growth plan, i.e. Runway to Success 2020, with an EBITDA target of RM3.0b on the back of passenger growth of 40% by 2020. Whilst their 2016 headline KPI remains with a passenger growth of 2.5% and 10.8% in Malaysia and Turkey, respectively. That said, they are also aiming to achieve an EBITDA target of RM902.1m for Malaysian operations while EUR180.9m for Turkey operations. We think that their 2016 KPIs are achievable as we are looking at a pax growth of 3% for Malaysia and 20% in Turkey.

Change to Forecasts

No changes to our FY16-17E earnings at this juncture, as we are looking to review our numbers upwards post briefing to be held today (28-Apr-16).

Rating

UNDER REVIEW

Valuation

We are placing our recommendation and Target Price UNDER REVIEW at this juncture, as we might look to raise our recommendation and Target Price post briefing due to its better-than-expected earnings performance. Previously, we had an UNDERPERFORM call with a SoP driven TP of RM5.24, which implies a FY16E Price-to-Book of 1.12x, which is at its 5-year FWD -2SD levels.

Risks to Our Call

Significant passenger numbers pickup.

Lower-than-expected operational costs (i.e. utility costs, staff costs and etc.)

Source: Kenanga Research - 28 Apr 2016