Investment Highlights

• We maintain HOLD on Malaysia Airports Holdings (MAHB) with an unchanged fair value (FV) of RM7.81/share, pegged to FY24F PE of 19x which is 1 standard deviation below its 2- year FY18–FY19 pre-pandemic average of 22x.

• Our FV also incorporates a 3% premium to account for an unchanged 4-star ESG rating (Exhibit 6), underpinned by the group’s initiatives to increase the usage of renewable energy.

• We deem MAHB’s 1QFY23 core net profit (CNP) of RM82mil within expectations despite accounting for only 19%-20% of our FY23F earnings and street’s. This is premised on anticipations of subsequent earnings improvement on the back of the recovery in passenger traffic in upcoming quarters. Therefore, our forecasts are unchanged.

• YoY, the group’s 1QFY23 revenue surged by 81% mainly underpinned by stronger contributions from airport operations alongside an exceptional rebound in passenger traffic in Malaysia and Turkiye. Sequentially, backed by higher revenue and better profit margins from a leaner cost base, 1QFY23 CNP turned around from a core net loss of RM118mil in 1QFY22.

• Recall that its airports in Malaysia recorded a 2.2x YoY growth in passenger movements to 18.7mil in 1QFY23 from 8.3mil in 1QFY22, which represented an impressive 74% recovery to 2019 levels. Also, the Turkiye-based Istanbul Sabiha Gokcen International Airport (ISGA) posted a 25% YoY increase in passenger traffic to 8.1mil pax in 1QFY23 from 6.4mil pax in 1QFY22 – equivalent to a 99% recovery to 2019 levels.

• QoQ, 1QFY23 revenue rose mildly by 3% mainly due to stronger contributions from Malaysian operations amid slightly higher passenger traffic and better retail sales. Despite the marginal increase in revenue, MAHB’s core earnings rebounded from a 4QFY22 core loss of RM41mil as a result of substantially lower operating expenses.

• Notably, staff cost declined by 27% QoQ mainly due to the absence of one-off merit-based remuneration incurred in 4QFY22. We also understand that the group’s core cost per passenger continued to decline by 12% QoQ to RM16.5/pax 1QFY23 from RM18.67/pax in 1QFY22, which further underpinned the higher quarterly earnings.

Source: AmInvest Research - 31 May 2023