INVESTMENT HIGHLIGHTS

• 1HFY18 core earnings came in at RM243.3m

• Core PATAMI registered +91.0%yoy higher

• Driven by robust passenger growth

• Downgrade to NEUTRAL (pursuant to recent price run-up) with an unchanged TP of RM9.88

Within expectation. MAHB’s 1HFY18 net earnings (after excluding one-off gains) at RM243.3m came in within expectations. It accounted for 47.4% and 55.2% of ours and consensus’ expectations respectively. Core earnings grew by +91.0%yoy, owing to the strong traffic flow in the international sector. For 2QFY18, the group recorded core earnings at RM85.5m, an increase of +29.5%yoy.

Higher international traffic growth. 1HFY18 revenue rose by +5.0%yoy. This was in-line with the +5.2%yoy weighted-average growth of passengers’ traffic in both Malaysia and Turkey in the period. Overall international traffic grew +8.3%yoy, showing robust demand of this particular segment. This was buoyed by continuous increase in traffic flow, attributable to supportive visa policy and healthy tourism landscape. On domestic front, Eid Al-Fitr holidays, which coincided with the two weeks mid-term school break was the driver in 2QFY18. The improvement of passengers’ traffic had positive impact to PSC and rental revenue which together constitutes 59.0% of 1HFY18 total revenue:- 1) The Passenger Service Charge (PSC) rate for international traffic is considerably higher compared to domestic traffic; hence a higher ratio of international traffic (at 53.3%) drove PSC revenue up +15.6%yoy for the Group. 2) Improvement in retail revenue led to positive rental reversion rates with rental revenue per m² rising from RM6.0k to RM6.1k, leading to +8.1%yoy increase in rental revenue.

Overall expenses inching down. While revenue improved, we were encouraged to see overall direct costs dropped by -4.4%yoy. This was a result of cost savings from direct labour (-4.3%yoy) and direct overheads (-6.5%yoy) in 1HFY18. Staff costs which represent the biggest chunk of opex were lower, amounting to RM300.2m. The - 2.9%yoy decline was due to writeback of bonus provision of RM21.0mil.

Source: MIDF Research - 29 Aug 2018