• Maintain BUY with MYR8.66 TP, 13% upside, c.3% yield. Last year’s total passenger movements surpassed the 100m mark for the first time since 2020, translating to an 84.6% recovery rate against 2019’s levels. Airports in Malaysia also recorded the highest monthly international traffic since 2020, in tandem with the December holiday season. Meanwhile, Turkey continued to exceed its 2019 levels. We expect to see a full recovery (+25% YoY) in 2024 passenger movement. Our TP includes a 6% ESG discount.

• Malaysia. Airports in Malaysia welcomed 4m international passengers in Dec 2023 – the highest monthly traffic since Feb 2020. This brought the full-year number to 81.9m (83.2% of 2019’s level), with international and domestic movements at 38.6m and 43.3m respectively. 2023 passenger traffic performance missed the Malaysian Aviation Commission’s (MAVCOM) forecasts but was in line with our expectations. The total, international, and domestic passenger movements made up 97%, 97%, and 98% of our full-year estimates. Average load factor recorded in 2023 was 77.2%, with Dec 2023 having the highest average load factor for both international and domestic sectors at 80%.

• Record high for Turkey. Istanbul SGIA saw another significant milestone, with total passenger movements reaching a record high of 37.6m – primarily driven by airlines’ rapid expansion and new airline operations. This translated to a 104.5% recovery rate, and represented 100.3% of our FY23 estimates. International and domestic passenger movements stood at 19.6m (137.5% of 2019’s levels) and 18.0m (82.8% of 2019’s levels), at 99.8% and 100.9% of our full-year estimates.

• Outlook. In 2024, MAVCOM expects passenger traffic in Malaysia to reach between 93.9m and 107.1m passengers, signifying a full recovery. Our inhouse 2024F passenger traffic forecast of 105.9m also points to a full recovery (2019 passenger traffic: 105.2m). While we regard China as a key laggard, the rapid resumption of seat capacities and visa-free facility for citizens from China and India should serve as a compelling catalyst in 2024, stimulating Malaysia’s international tourism. We believe the resurgence in commercial rentals, tourism upswing, and potential operational changes from regulatory developments present under-appreciated catalysts – yet to be fully assimilated by the market. We maintain our DCF TP and earnings. MAHB is attractively valued, with implied FY24F EV/EBITDA of 6.9x, trailing behind its pre-pandemic mean of 11.3x and regional peers’ 19.7x.

• Risks: i) Further delays in commencement of regulatory frameworks, ii) lower-than-expected passenger volumes, passenger service charge (PSC) and parking & landing charges, and iii) higher-than-expected opex.

Source: RHB Securities Research - 2 Feb 2024