INVESTMENT HIGHLIGHTS

• Total passenger movements (including ISGA) for MAHB advanced +3.8%yoy in November 2018

• Domestic passenger traffic experienced its biggest gain since June 2018

• International passenger traffic soared to a three-month high amidst commencement of flights of new airlines

• Maintain BUY on the with unchanged TP of RM9.88 per share

Passenger traffic in November 2018 remains steady. The November passenger traffic for MAHB airports (excluding ISGA) grew by +4.3%yoy to 8.3m passengers, bringing the year-to-date passenger traffic to 89.7m. For ISGA, its robust international passenger growth of +15.5%yoy for the same month outweighed the effects of: (i) the cancellation of Izmir’s daily route by Sunexpress airlines; and (ii) the reduction of aircraft utilisation by Pegasus airlines for domestic routes. As such MAHB’s total passenger traffic grew by 3.8%yoy in November, marking its 11th month of positive growth for 2018.

Rebound in domestic traffic. Domestic traffic for Malaysia in November 2018 increased by +4.6%yoy to 4.0m passengers, the biggest gain recorded since June 2018 which saw a +11.0%yoy increase. The bulk of the growth was attributable to a +13.1%yoy jump in domestic traffic at klia2 in the wake of AirAsia Group’s capacity expansion which was observed in 3QFY18.

International traffic soared to a three-month high. Likewise, international passenger traffic in Malaysia advanced by +3.9%yoy to 4.3m passengers, the largest in three months. The commencement of flights of Indian low-cost airline, Indigo Airlines and German leisure airline, Condor Airlines to klia2 and KLIA Main Terminal respectively drove the growth in the international sector which resulted in a commendable load factor of 77.8% in November, +1.7ppts higher than a year ago.

Pinning on the year-end seasonal factor. We reckon that there is more room for passenger growth in December as major school examinations are set to end by middle of the month. This is in addition to two more public holidays, i.e. the birthday of Sultan of Selangor and Christmas which fall on Tuesday that will likely encourage Malaysians to extend their leave and travel. As such, we are maintaining our passenger forecasts for FY18. On the departure levy set to be imposed in June 2019 for outgoing international passengers, sensitivity towards the increase in passenger service charges (PSC) for international destinations has always been minimal, historically. Moreover, we reckon the overall tourism initiatives outlined in Budget 2019 could uphold the demand in the nation’s tourism sector, supporting the overall load factor at MAHB airports. We maintain BUY call on MAHB with a TP of RM9.88 per share.

Source: MIDF Research - 11 Dec 2018