KEY INVESTMENT HIGHLIGHTS

• 9MFY19 normalised earnings surged more than 20.0%.

• Domestic traffic grew faster than international traffic

• Retail and revenue increased despite ongoing commercial reset

• Cost per passenger still well contained despite rise in direct and overhead costs

• Ongoing efforts remain to ensure RAB implementation by year end

• Earnings forecast unchanged

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

9MFY19 normalised earnings surged more than 20.0%. MAHB’s 3QFY19 recorded normalised earnings (after excluding one-off gains) of RM192.2m. This brings the 9MFY19 normalised earnings to RM467.9m (+22.4%yoy). The results made up 83.8% and 82.1% of ours and consensus’ full year estimates. While the fourth quarter is always the strongest in terms of revenue, it is not uncommon for the fourth quarter to be a kitchen sinking quarter. Based on past trends, earnings in the fourth quarter are usually impacted by large adjustments in expenses such as employee benefits. As such, we deem the results to be within expectations.

Domestic traffic grew faster than international traffic. The 9MFY19 revenue (excluding construction revenue) rose by +7.5%yoy. This was in-line with the overall +5.5%yoy growth of passengers’ traffic in both Malaysia and Turkey for the period. MAHB’s domestic traffic growth in Malaysia during 9MFY19 of +10.0%yoy outpaced its international traffic growth of +2.2%yoy as airlines redirected more capacity to meet the domestic travel demand. Moreover, there was a series of three long weekends in September 2019 and (ii) the Aidiladha and the national day holidays in August. The haze which occurred in the middle of September appeared to have no impact to the travel sentiment. Looking ahead, we expect airlines will continue shifting capacity from the international to domestic sector at least until 1QCY20.

The international passenger continues to reach a record high.

Although the international traffic did not grow as much as the domestic traffic 9MFY19, the international passenger traffic of 13.4m recorded in 3QCY19 was also the highest ever recorded on a quarterly basis in Malaysia. Besides the series on long weekends, the +3.3%yoy growth in international traffic during 3QCY19 partially came from the Hajj movements in August 2019. It also proved that the haze in September 2019 did not adversely impact travel demand. We believe that North Asia (China, Taiwan and Korea) likewise supported international traffic in September due to the mid-Autumn festival.

Source: MIDF Research - 28 Nov 2019