Passenger movement surged 10.5% in 1Q17

MAHB reported the total passenger movement for Mar-17, which increased by 10.6% YoY (11.5% MoM) to 8.1mn (see Figure 1) for Malaysia’s traffic. This was led by 12.4% (7.9% MoM) growth in the international segment (see Figure 3) and 9.0% (-14.4% MoM) growth in the domestic segment (see Figure 4). For the international segment, the growth was mainly derived from non-Asean traffic, which increased by 16.4% while the Asean traffic grew 8.4% YoY in March-17

On a cumulative basis, 1Q17 growth extended to 10.5% versus 9.2% in 2M17 for Malaysia’s traffic. This was again led by the increase in international traffic, which increased by 12.0% YoY, followed by the domestic segment which rose 9.0%. The commendable growth in the international passenger traffic can be attributed to increased inbound traffic on the backdrop of visa relaxation and ringgit depreciation. According to announcement, passenger traffic to and from 20 countries, including UK, New Zealand, Japan, Taiwan and Vietnam, registered more than 20% growth in 1Q17.

ISG reported cumulative growth of -1.9% for 1Q17

Istanbul Sabiha Gokcen (ISG) airport recorded 4.1% (see Figure 2) increase in passenger movement in Mar-17, led by the domestic segment, which increased by 4.4% (see Figure 6) while the international segment grew 3.5% YoY (see Figure 5). With that, the cumulative 1Q17 growth recovered slightly to -1.9% from -5.1% a month ago. The first YoY growth after three months of contraction signals that the aftermath of military coup and terrorist attack in Istanbul could have been digested by the market already.

Forecast

Overall, the 1Q17 passenger growth of 10.5% in Malaysia is higher than our fullyear forecast of 4.8% and management growth target of 6.5%. However, we consider the growth to be on track as 2H17 growth is expected to moderate further due to high base effect. Meanwhile, for Istanbul operations, the 1Q17 growth of -1.9% is also on track with our growth expectation of 7.2% (management target of 7.2%) as 2H17 growth is expected to recover from the low base. Note that MAHB recorded passenger growth of 9.1% and -1.0% in 2H16 for its Malaysia and Istanbul operations respectively.

Valuation

We maintain our DCF valuation at RM7.68/share based on discount rate of 10.7%. Given the YTD price appreciation of 19.6%, we believe the market has largely factored in those re-rating catalysts, ie: 1) the concession extension of additional 35 years and possible change in airport tax and user fee structures, and 2) increasing interest from multinational companies to take part in Aeropolis development following the MoU between MAHB and Alibaba to set up regional eCommerce and Logistics Hub in KLIA Aeropolis. As such, we downgrade MAHB to Sell (from Buy previously)

Source: TA Research - 11 Apr 2017