KEY INVESTMENT HIGHLIGHTS

• Total passenger movements (including ISGA) advanced +5.5%yoy in October 2019

• Domestic traffic in Malaysia for October 2019 registered a double-digit growth for the fourth consecutive month

• International passenger traffic in October 2019 for Malaysian operations increased by +7.8%yoy to reach 4.3m passengers, the highest since June 2018

• ISGA’s location continues to be the main pull factor for its passenger growth especially for international flights

• Maintain BUY with an unchanged TP of RM9.43 per share

Passenger traffic growth continues in August 2019. The October 2019 passenger traffic for MAHB airports (excluding ISGA) increased by +10.0%yoy to 8.6m passengers, extending gains for the 12th

consecutive month. In fact, this was the highest passenger traffic recorded thus far in 2019. On a cumulative basis, the passenger traffic for airports in Malaysia in the first 10 months of 2019 posted a +6.3%yoy increase to reach 86.6m, making up 84% of our FY19 passenger traffic growth estimates of 102.5m.

ISGA’s international traffic reached a record performance. For ISGA, international passenger traffic jumped +23.5%yoy to reach 1.3m for the same month, outweighing the -2.2%yoy decline to 1.8m in domestic passenger traffic. This brings ISGA’s overall passenger growth for the first 10 months of 2019 to +3.3%yoy after hitting 29.8m passengers. The catalyst for the international sector was the geographical location of ISGA which is nearer to the Istanbul city. Overall, MAHB’s total cumulative passenger traffic (including ISGA) grew by +5.5%yoy to 116.3m for the first 10 months of 2019.

Domestic traffic continued its upward trend. Domestic traffic for airports in Malaysia in October 2019 continued its upward trend, increasing by +12.3%yoy to 4.3m passengers. We also noted that the domestic traffic had registered a double digit year-on-year growth for the fourth uninterrupted month. The bulk of the growth in October 2019 was attributable to the +27.5%yoy jump in domestic traffic at KLIA Main Terminal. We opine that the growth is attributable to the shift in airlines capacity from the international to the domestic sector in addition to the Deepavali festival.

International traffic remains firm. International passenger traffic in October 2019 for Malaysian operations increased by +7.8%yoy to reach 4.3m passengers, the highest since June 2018. This increase was partly contributed by the robust travel demand backed by the addition of new routes, frequencies and also airlines. For example, Qatar Airways commenced new flights to Langkawi International Airport from Doha via Penang International Airport in October 2019. This is in line with MAHB’s strategic plans of bringing global traffic to smaller airports and vice versa.

Earnings estimates. No changes made to our earnings estimates.

Target price. We are maintaining our target price to RM9.43 per share. Our valuation is based on our DCF assuming an unchanged WACC of 7.3% and Beta of 1.1.

Source: MIDF Research - 12 Nov 2019