KEY INVESTMENT HIGHLIGHTS

• MAHB passenger traffic excluding ISG grew by +6.1%yoy in 2019, exceeding our estimates

• International sector continued to retain more than 50% of the passenger market share

• Expecting a leaner 4QFY19 performance after observing a +6.6%yoy growth in passenger traffic

• Earnings estimates revised upwards as actual passenger traffic came above our expectations

• The positive earnings revision was negated by the adjustment of higher beta and WACC to account for increased regulatory uncertainty

• Maintain BUY with a revised TP of RM8.98 per share

MAHB passenger traffic grew by +5.6%yoy in 2019. MAHB saw its 2019 passenger movement increase by +5.6%yoy which includes ISG. This translates to a total of 140.6m passengers. For MAHB’s airports in Malaysia, passenger traffic grew by +6.1%yoy to 105.2m for the whole of 2019 which exceeded our full year estimates by 2.6%. This is the first time that MAHB’s passenger traffic in Malaysia breached the 100m mark. We note that the bulk of the absolute increase was contributed by passenger traffic at airports other than KLIA Main Terminal and klia2 which saw an annual increase of more than 3.0m passengers in 2019.

Solid domestic traffic growth. Domestic traffic at Malaysian airports recorded a solid growth of +9.5%yoy in 2019, partly a correction from previous low performance whereby the domestic passenger traffic has been experiencing a decline for more than a year prior to January 2019. The increase recorded in 2019 was substantially higher than +0.4%yoy increase in the preceding year. We note that the international passengers in Malaysia only grew by +3.0%yoy in 2019, partly due to capacity shift from international to domestic sector. Notwithstanding this, the international sector continued to retain more than 50% of the passenger market share.

Expectations 4QFY19 performance. On a quarterly basis, the total passenger traffic for MAHB’s airports in Malaysia reached 27.2m passengers in 4QFY19, +6.6%yoy higher than 4QFY18. As such we are expecting earnings in 4QFY19 to be around RM100.0m. Recall that MAHB recorded a 9MFY19 normalised earnings of RM467.9m.

Earnings estimates. We have imputed the actual figures of the passenger traffic into our model. This has also led to a passenger traffic growth of 110.8m passengers (previously 107.0m passengers) in FY20 and 115.5m in FY21. Therefore, we are adjusting our earnings forecast for FY19,FY20 and FY21 by +2.2%,+4.9% and +4.9% respectively.

Source: MIDF Research - 13 Jan 2020