13 October 2015
AllianceDBS Research has maintained its “hold” call on Malaysia Airports Holdings Bhd (MAHB) but cut its target price to RM5.40 after reducing its passenger traffic forecasts for Malaysia in FY16-FY17 forecast by 3%.
“We now expect Malaysian traffic to grow by only 1% in FY16F, and 5% per annum thereafter,” the research house said on Tuesday.
MAHB is on track to hit its 3% Malaysian passenger growth target in FY15F, but this will be driven by the low-yielding non-KLIA and domestic segments.
“Malaysian Airlines (MAB) has cut international ASK by 23% which will affect MAHB’s traffic, but we still expect its Malaysian passenger traffic to grow by 1% in FY16F, helped by AirAsia group and Malindo. Also, we expect airport tax/pax to drop by 1%/4% in FY15/16F, as these airlines operate out of klia2, where airport tax is 36-59% lower than KLIA,” AllianceDBS said.
Furthermore, it said MAHB’s ISG airport in Istanbul, Turkey was slated to turnaround this year. But, MAHB is still expected to record a loss from the Turkish operations, dragged by additional amortisation on the fair value gain on ISG acquisition.
However, this does not have an impact on valuation, as it does not affect cash flow.
It valued ISG at 524 million Euro, translating into RM2.4bil or 27% of MAHB’s SOP valuation, at the rate of RM4.61 per euro.
“Our RM5.40 target price is based on SOP valuation, where we value the Malaysian and Turkish operations using DCF, KLIA landbank at RM7.50 psf, and its stake in Hyderabad airport at book value. Our TP implies 1.2 FY16F P/BV,” AllianceDBS said.
The research house said Malaysian passenger traffic grew by only 2% in the first eight months. If traffic does not pick up in the coming months, MAHB’s passenger traffic could undershoot its 3% growth target for FY15F. Also, MAB’s restructuring plan could pose a risk to the group’s passenger traffic in FY16F.
Original Source: thestar.com.my
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