We do not expect any major surprises in MAHB’s 1QFY13 results due to be  released  this  Friday,  other  than  the  possibility  of  Management announcing  a  new  deferred  date  for  the  opening  of  KLIA2.  While  such concerns will hit investor sentiment, we advocate to accumulate on any share  price  weakness  as  the  fundamentals  and  growth  prospects  of MAHB  remains promising.  We  maintain  our  BUY  call,  with  our  FV  of MYR7.23 unchanged.

Commendable results expected. MAHB will be reporting its 1QFY13 results this  Friday,  26  April.  Earnings  are  expected  to  be  within  expectations  – core net  profit  of  MYR95m  (-13%  y-o-y)  on  the  back  of  MYR730m  in  revenue (+11%  y-o-y).  Though  revenue  is  projected  to  rise  on  the  back  of  higher passenger volume (+8% y-o-y) and passenger spending, we anticipate that its 
bottomline will be lower due to the higher user fee incurred, which is expected to double on a full year basis.

Impact  of  KLIA2  delay.  There  is  possibility  that  completion  of  the  Kuala Lumpur International Airport 2 (KLIA2) will be delayed. The key question is for how  long  and  whether  there  will  be  any  cost  overruns.  Compared  against  a scenario with the KLIA2 being operational on the first day of FY13, the delay would  reduce  our  revenue  forecasts  by  4% in  FY13  and FY14,  due  to  lower rental and passenger spend. However, this will be offset by lower operational costs  and  hence,  the  downward  revision  in  EBITDA  would  only  be  by  1%  in FY13  but  by  as  much  as  9%  for  FY14  and  5%  in  FY15  onwards,  as  we assume  more  improved  earnings  to  kick  in  a  year  earlier.  Meanwhile, significant  costs overruns  would  unlikely be passed  through to  MAHB as the 
delays are not caused by the variation of its order – its fixed contractual terms imply that the risks of higher costs will be borne by the contractors.

Investment allowance could improve cash flow. A key catalyst that would improve  cash  flow  is  a  possible  investment  tax  allowance,  as  it  is  seeking  a 25%  tax  rebate  based  on  the  capex  allocated  for  KLIA2.  Management  is hopeful that the application would be approved.

Maintain  BUY. We  maintain  our  earnings  forecasts,  for  now,  and  retain  our BUY call. Our FV of MYR7.23 is premised on a WACC of 7.6%. On an FY14 EV/EBITDA  basis,  this  gives  an  implied  value  of  11.4x  which  is  15%  higher than it peers’. We deem this fair due to the earnings potential of KLIA2.

Source: RHB