KEY INVESTMENT HIGHLIGHTS

• FY19 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 adjusted following revision in passenger traffic forecast

• Maintain BUY with a revised TP of RM7.83 per share

FY19 normalised earnings surged more than 20.0%. MAHB’s 4QFY19 recorded normalised earnings (after excluding one-off gains) of RM30.7m (+8.8%yoy). This brings the FY19 normalised earnings to RM564.5m (+31.4%yoy). The results made up 101.1% and 96.3% of ours and consensus’ full year estimates. The positive performance for the year was mainly due to the better-than-expected passenger traffic growth in Malaysia of +6.1%yoy

Domestic traffic grew faster than international traffic. The FY19 revenue rose by +7.4%yoy. This was in-line with the overall +5.6%yoy growth of passengers’ traffic in both Malaysia and Turkey for the period. MAHB’s domestic traffic growth in Malaysia during FY19 of +9.5%yoy outpaced its international traffic growth of +3.0%yoy as airlines redirected more capacity to meet the domestic travel demand. The domestic traffic growth in Malaysia even rebounded from the 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.

The international passenger continues to reach a record high. Although the international traffic did not grow as much as the domestic traffic FY19, the international passenger traffic in Malaysia of 53.3m recorded was also the highest ever recorded on an annual basis in Malaysia. Moreover, the international sector continued to retain more than 50% of the passenger market share. Furthermore, considering the international average load factor at 77.1%, being 4.3 percentage points higher than the domestic load factor, indicating the inherent demand for international travel remained resilient. The growth of international traffic was supported by the airlines’ additional frequencies, direct connectivity and also contribution by new routes that were not operated previously. For instance, Qatar Airways’ flights commenced flights from Doha to Langkawi in October 2019, part of MAHB’s hub-and-spoke model which aims to bring global traffic to smaller airports and vice versa

Source: MIDF Research - 2 Mar 2020