By Sherilyn Goh
Airport operator Malaysian Airport Holdings Bhd (MAHB) sees its call downgraded to “sell” by TA Securities, with a revised target price of RM5.40 from RM5.68 previously, on the back of a weaker-than-expected traffic growth in September and the lack of near-term catalysts to drive future earnings.
Recently released airport traffic data indicated MAHB’s total passenger movement in September 2015 to have increased by 1.1% year-on-year (y-o-y) to record 6.7 million passengers for its Malaysian operations, led by 1.9% growth in the domestic segment and 0.3% growth in the international segment.
On a quarterly basis, passenger volume in the third quarter of 2015 (3Q15) surged 5.8% y-o-y to record 21 million passengers, driven by 6.6% and 4.8% growth in the domestic and international segments respectively.
“On a cumulative basis, the growth was little change at 1.7% for the nine months ended September 30, 2015 (9M15) as compared to that of the eight months ended August 31, 2015 (8M15) for Malaysia’s traffic. This was led by increase of 3.1% in the domestic volume and 0.2% in the international segment.
“As we are only three months away to close financial year 2015, we believe our traffic growth assumption of 3.8% for 2015 is optimistic due to 9M15 traffic was only 1.7% higher than 9M14, and that the current haze situation is Malaysia, Singapore and Indonesia may affect travel sentiments,” explained TA Research in its note published today.
On a brighter note, MAHB’s wholly-owned Istanbul Sabiha Gocken Airport (SGIA) in Turkey continued to chart commendable performance with decent growth of 28.9% and 12.1% in the domestic and international segments respectively in September 2015.
“This has boosted the cumulative growth further to 19.4% in September 2015 from 19% a month ago. As 4Q15 growth may continue to stay strong, we believe our growth assumption of 15% for SGIA’s traffic is too pessimistic,” added TA Research.
TA Research is revising its traffic growth assumptions for the both MAHB’s operations in Malaysia and Istanbul, and revising its euro ringgit (EURMYR) assumption to RM4.30-RM4.50 from RM4.25 for 2015-2017.
As such, the research house is trimming its FY15 earnings projections by 19.2%. TA Research however raises its FY16-17 forecast by between 5.6% and 8%, after taking into consideration higher anticipated traffic for SGIA and a higher EURMYR rate.
“From our recent upgrade in September 2015, MAHB’s share price has recovered 22% to current level of RM5.26. We believe the stock has found its bottom at the recent low of RM4.22. However, for the price to move higher from the current level, there must be strong factors to drive future earnings, which we do not see in the near term.
“Given the change in earnings and cash flow, we adjust our free cash flow to equity (FCFE) valuation lower to RM5.40 per share, based on unchanged discount rate of 10.7%,” said TA Research.
At 11.47am, MAHB is trading 28 sen higher RM5.54.
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