INVESTMENT HIGHLIGHTS

• Some airlines may relocate from new Istanbul airport to ISGA

• Enough capacity in ISGA to cater for incoming airlines

• Commencement of metro line to increase connectivity between Istanbul and ISGA

• Turkey operations buttressed by an increase in international flight frequencies amidst route restructuring

• Maintain BUY with an unchanged TP of RM8.80 per share

Some airlines may relocate from new Istanbul airport to ISG. A possible relocation of some airlines operating at Istanbul’s new airport to ISG may happen by the end of this year. This is due to the roughly 40% higher operating costs at the new airport compared to the Ataturk airport, Istanbul’s old airport. The geographical location of ISG near Istanbul city is another factor attracting airlines to relocate there.

Enough capacity in ISGA to cater for incoming airlines. In FY18, ISG recorded an +8.8%yoy growth in total passengers, the largest annual growth in three years. The 34.1m passengers recorded with an overall annual capacity of around 41m in FY18 translates to a utilisation rate of 83.0%. Currently, ISG’s second runway is being constructed by the Turkish government and is expected to commence operations by 1QFY20, enabling the airport to handle up to 80 flight movements per hour, doubling its current capacity.

Increased connectivity from infrastructure development. Another catalyst for ISG’s growth this year would be the completion of the metro transportation facility expected to be completed in 3QFY20. This will link ISG to major points of Istanbul which is roughly 45km apart from the airport, increasing connectivity for airport users in that area.

How ISGA has fared so far for the year. ISGA’s recorded overall passenger growth of +18.7%yoy for the first five months of 2019. The catalyst for the international sector was the ongoing route restructuring by carriers, such as Pegasus Airlines, since late 2018 to expand into more international routes. The latest route addition in May 2019 included destinations to Basra while Manchester and Venice will be introduced later in July 2019. Overall, MAHB’s total cumulative passenger traffic (including ISGA) grew by +3.7%yoy to 55.7m for the first five months in 2019.

Source: MIDF Research - 14 Jun 2019