INVESTMENT HIGHLIGHTS

• Total passenger movements (including ISGA) advanced +5.6%yoy in April 2019

• Yearly growth for domestic passenger traffic in April reached the highest in nearly two years

• Easter holidays supported the growth in April’s international traffic

• Turkey operations buttressed by an increase in international flight frequencies

• Maintain BUY with an unchanged TP of RM8.90 per share

Passenger traffic grew the largest in 10 months for April 2019. The April 2019 passenger traffic for MAHB airports (excluding ISGA) increased +6.6%yoy to 8.8m passengers. This was the highest growth recorded in 10 months. On a cumulative basis, the passenger traffic for the first four months of 2019 posted a +4.7%yoy increase to reach 34.2m, making up 33.7% of our FY19 passenger traffic growth estimates of 102.5m.

Increased flight frequencies boosted ISGA’s international traffic. For ISGA, international passenger traffic soared +24.3%yoy to reach 1.2m for the same month, a level not seen since August 2018. The catalyst for the international sector was the increase in flight frequencies by Ariana Afghan Airlines and Pobeda Airlines which helped to offset the -8.5%yoy decline in domestic passenger traffic due to the route restructuring by Pegasus Airlines. This brings ISGA’s overall passenger growth in April 2019 to +2.5%yoy after hitting 2.9m passengers. As such, MAHB’s total passenger traffic (including ISGA) grew by +5.6%yoy in April 2019, marking its 11th consecutive month of year-on-year (y-o-y) growth.

Domestic traffic continues its upward trend. Domestic traffic for airports in Malaysia in April 2019 continued its upward trend, increasing by +11.2%yoy to 4.4m passengers, the largest growth recorded in nearly two years. As a result, y-o-y growth seen in domestic traffic extended to its sixth consecutive month. The bulk of the growth was attributable to the +13.8%yoy jump in domestic traffic at airports ex-KLIA. We attribute the growth to the shift in airlines capacity from the international to the domestic sector.

International traffic remains firm. International passenger traffic for April 2019 for Malaysian operations increased by +2.5%yoy to reach 4.4m passengers, the highest in five months. This was mainly boosted by the Easter holidays in western countries. It was also notable that the ratio of international to domestic passengers for Malaysian operations stood at 51:49 which bodes well for MAHB as the passenger service charge for international passengers is higher compared to domestic passengers. MAHB targets to bring in 10 new airlines to Malaysia, especially to its five main airports. This will maintain the stronger mix of international passengers which bodes well for MAHB in terms of the higher passenger service charges collected; RM35 for non-ASEAN and RM73 for beyond ASEAN.

Source: MIDF Research - 13 May 2019