INVESTMENT HIGHLIGHTS

• 1QFY19 normalised earnings in line with expectations

• Domestic traffic growth outpaced international traffic

• Favourable mix of above 50% for international passengers maintained

• Cost per passenger well contained at RM34.80 per passenger

• Maintain BUY with a revised TP of RM8.80 per share as we roll over our valuation base year to FY20

Within expectations but slight lower. MAHB’s 1QFY19 recorded normalised earnings (after excluding one-off gains) of RM146.0m. The results came in within our and consensus’ expectation, accounting for 26.1% and 28% of respective full year estimates.

Domestic traffic grew faster than international traffic. The 1QFY19 revenue (excluding construction revenue) rose by +5.2%yoy. This was in-line with the +3.1%yoy growth of passengers’ traffic in both Malaysia and Turkey for the period. MAHB system’s domestic traffic growth in 1QFY19 of +4.0%yoy outpaced its international traffic growth of 3.4%yoy as airlines redirected more capacity to meet the domestic travel during the Chinese New Year festive season.

The international passenger mix remains favourable above 50%... Although the international traffic did not grow as much as the domestic traffic for the quarter, the absolute international passenger volume remained above the average high base traffic achieved in 2HFY18. In fact the international passenger movements continued to retain more than 50% of the passenger mix.

….positively impacting PSC revenue. The stronger mix of international passengers bodes well for MAHB in terms of the: (i) higher passenger service charges (PSC) collected; RM35 for non-ASEAN and RM73 for beyond ASEAN for Malaysian operations, and (ii) the introduction of passenger security service charges (PSSC) for international departing passengers worth EUR3 for Turkish operations. As a result, the revenue collected from the PSC and PSSC increased by +8.8%yoy, lifting the aeronautical revenue up by +9.9%yoy.

Source: MIDF Research - 3 Jun 2019