INVESTMENT HIGHLIGHTS

• Total passenger movements for MAHB advanced +2.9%yoy in August 2018

• International passengers for Malaysia grew by +1.0%yoy

• KLIA2 mainly contributed to domestic passenger growth

• 2HFY18 looking good to hit full year estimate

• Maintain NEUTRAL on the stock with TP of RM9.88

Passenger traffic in August 2018 remained steady. The August passenger traffic for airports in Malaysia saw another positive improvement, growing by +0.9%yoy (excluding ISGA), recording a total of 8.5m passengers. Despite the Turkish Lira crisis, the passenger traffic growth in ISGA for August 2018 remained resilient at +8.5%yoy, bringing the total passenger number under MAHB’s network of airports to 11.8m or +2.9%yoy higher. This overall number of passengers was amongst the highest achieved thus far and was partly attributable to the summer holidays in Turkey and the Hajj travel season.

International sector up for the third straight month. Domestic traffic for Malaysia in August 2018 increased by +0.8%yoy to 4.1m passengers, mainly contributed by the +5.7%yoy growth in KLIA2. For the international sector, passenger traffic in Malaysia showed a positive yearly growth for the third straight month albeit at a tapered level of +1.0%yoy compared to +17.1%yoy in August last year. This was due to the high base effect coming from the SEA Games held at Kuala Lumpur from 19-30 August 2017 in addition to the school holidays. Nonetheless, the momentum of the international sector for Malaysia has remained consistently above 4.2m passengers for the past three months, which we opine will help to expand the traffic percentage of high value passengers moving forward. Accordingly, we expect the seasonal factors such as China Golden Week and school holidays will continue to lend support to MAHB’s earnings for the rest of the year.

Remaining of the year looking good to hit estimates. We believe the strong momentum of traffic flow to continue, which will be led by the international segment. We premised our expectations on the robust air travel demand. Chinese tourists are still expected to be the driver, due to supportive visa policies in Malaysia. We recall that Chinese accounted for 10.0% of Asian tourists in 2017, under which the number of passengers have grown at a 3-year CAGR of +10.8% annually. While we note this positive development, we believe that the positives have already been priced in. Accordingly, we maintain our NEUTRAL call on the stock with an unchanged TP of RM9.88

Source: MIDF Research - 13 Sept 2018