INVESTMENT HIGHLIGHTS

• Total passenger movements for MAHB increased by +3.4% yoy in April

• Mostly driven by international passengers

• Tepid growth, but likely to pick up in the near term

• POSITIVE for MAHB with a BUY call of RM9.80

PASSENGER TRAFFIC FOR AIRPORTS IN MALAYSIA: APR 2018

Passenger traffic slowing down in April. Passenger traffic growth in Malaysian airports slowed to +0.6%yoy in April, recording a total of 8.2m passengers. This was due to high base effect in the same period last year, where the overall traffic grew strongly by +17.1%yoy to 8.1m passengers. Despite this, we believe the April 2018 traffic will partly support 2QFY18’s growth, as we expect the subsequent months to see more robust traffic passenger traffic.

International passengers came to rescue. The domestic front took a hit again in April, contracting by -3.9%yoy to 3.9m passengers. We attribute the decline to the total capacity cuts of -1.4%. Our optimism continues despite the drop, fuelled by the increase of international traffic at +5.5%yoy which more than offset the decline in domestic traffic. Moving forward, we expect the momentum to continue in subsequent month buoyed by key events in May and June, namely Ramadhan, Eid-fitr and worldwide summer holidays.

PASSENGER TRAFFIC FOR ISTANBUL SGIA: JANUARY 2018

Commendable growth in Istanbul. Including Istanbul’s Sabiha Gokcen Airport (ISG), MAHB’s total traffic growth climbed +3.4%yoy for the month of Apr 2018. ISG continued to see encouraging growth, expanding by double-digit at +12.3%. Notably, both international and domestic sectors grew at similar rate of circa +12.0%. Evidently, growth of passengers’ traffic was fuelled by frequency and capacity addition in the airport, as reflected in the +7.6% of overall growth in aircraft movements. Similar to the traffic in Malaysia airports, we are expecting ISG’ traffic growth in 2QFY18 to be stronger, benefiting from worldwide seasonal factors in the subsequent months of May and June.

The rest of 2Q should be better. Given our optimism of 2Q’s overall traffic performance, we are maintaining our POSITIVE stance on MAHB. Accordingly, we have a BUY call on the stock with unchanged TP of RM9.80. We expect the growth of passengers’ traffic to remain in positive territory, driven by higher international passengers. Following the results of GE14 last week, our optimism on the tourism sector remains strong. Despite the surprised change in Government in Malaysia, we are comforted that the transition has been smooth throughout. This should be a positive signal for a stable economic and political environment moving forward, leaving the tourism sector to benefit.

Source: MIDF Research - 15 May 2018