As  speculation  of  a  delay  in  KLIA2  and  potential  cost  overruns intensify, it has become clear that the terminal would only open in 2014. This  prompts  us  to  revisit  our  earnings  forecasts,  which  will  see  our FY13 estimates jump 65% due to lower depreciation while our FY14 and FY15  forecasts  are  down  4%  and  10%  respectively.  As  we  assume MAHB will bear RM500m in extra cost on the KLIA2, we lower our FV to MYR6.86. Given the 12% potential upside, we reiterate our BUY call.  

- KLIA2 only ready by 1 Feb 2014? Media reports speculating on a new opening  date  for  KLIA2  as  well  as  potential  costs  overruns  have intensified  of  late.  It  is  understood  that  the terminal’s contractors  have requested  that  KLIA2  commence  operations  on  1  Feb  2014,  in  view  of the enlarged scope of work involved.

- Who’s  to  blame?  Several  key  contractors  claim  that  their  work packages  are  on  track  for  timely  completion,  which  has  turned  the spotlight  on  UEM  Group,  the  party  contracted  to  construct  the  main terminal  building.  It  would  seem  that  the  delay  in  completing  the  main terminal  building  has  resulted  in  the  delay  being  spilled  over  and affecting  other  smaller  work  packages.  We  gather  that  the  liquidated ascertained damage (LAD) may cost each contractor found to have been 
at  fault  MYR200,000  a  day,  or  MYR6m  a  month.  Our  calculation  of  the potential  revenue  loss  amounts  to  at  least  MYR700,000  per  day, assuming 0% traffic growth, due to loss of rental and royalty revenue.

- April passenger numbers hit a high. In April, MAHB handled a record 5.9m  passengers  (up  12.5%  y-o-y,  9.7%  YTD)  for  that  month  owing  to capacity  additions  by  many  airlines.  So  far,  the  airport  operator’s passenger numbers are on track to hit our 11% growth forecast.  

- Tweaking forecasts. We revisit our earnings assumptions as it appears certain  that  KLIA2  is  likely  to  open  only  by  2014.  We  lift  our  FY13 earnings  by  63%  due  to  the  steep  fall  in  depreciation  expenses  due  to the  delay  in  commencement.  However,  we  trim  our  earnings  estimates for FY14 and FY15 by 4% and 10% respectively.

- Maintain BUY on MAHB, with a lower MYR6.86 FV (vs MYR7.23) as we assume costs overrun of MYR0.5bn. Our FV implies a 11.6x multiple on the group’s FY14 EBITDA, which is in line with its peers’ average.

Source: RHB