7 February 2012
Malaysia Airport Holdings Bhd (MAHB) recorded a double digit growth for two consecutive years following a 2011 passenger movement that breached its 60 million target.
“Passenger movement grew by 10.7 per cent year-on-year to 64 million, slightly below 12.7 per cent year-on-year (y-o-y) in 2010, underpinned by the 10.3 per cent and 10.7 per cent growth at the Low Cost Carrier Terminal (LCCT) and Kuala Lumpur International Airport (KLIA),” explained the research arm of MIDF Amanah Investmetn Bank Bhd (MIDF Research) explained in a research note.
Cargo movement slipped slightly by two per cent y-o-y, in line with the International Air Transport Association’s (IATA) estimate of about minus 0.5 per cent y-o-y for global cargo movements. The downward trend in air freight was mainly due to higher fuel cost and cheaper marine transport.
MAHB had projected passenger movement to grow by 6.6 per cent in 2012 which MIDF Research believed was reasonable and achievable due to robust demand in the Asia Pacific Region and sustainable growth in the LCCT especially in periods of global economic slowdown.
“Previously, MAHB management had revised the target passengers’ volume from 60 million to 72 million and RM1 billion of earnings before interest, tax, depreciation and amortisation by 2014 in its five years business plan,” the report added.
The research house maintained that it was comfortable with the target set out as the annual compounded growth rate with base case projections of four per cent would surpass the target by 2014.
It was revealed that MAHB had been looking for another two more concessions, adding to its current four airport concessions overseas. The research note stated that the preferred spot for the foreign investment would be in China and Indonesia, given the robust demand of these two highly populated nations in the Asian region.
“MAHB also proposed to raise equity financing through the issuance of 110 million new placement shares which is equivalent to 10 per cent of its existing share base,” MIDF Research stated.
The estimated RM600 million proceeds would be used to finance most part of the klia2 constructions. The research house believed that the potential dilution of earnings per share would reach about 9.1 per cent. However, the enlarged equity base would also cause the debt ratio to be lower from 0.77 to 0.66.
MIDF Research believed that the strong traffic growth in passengers would translate into higher revenue and thus matched its its full year revenue forecast through the release of the fourth quarter of financial year 2011 results.
It pegged a target price of RM7.30 per share for MAHB, based on discounted cash flow with 8.5 per cent of weighted average cost of capital.
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