Malaysia Airports Holdings Dampened by higher depreciation and amortisation
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- Jessica Bond
- 5 years ago
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1 18 February QFY15 Results Review Malaysia Airports Holdings Dampened by higher depreciation and amortisation Maintain NEUTRAL Unchanged Target Price (TP): RM6.35 INVESTMENT HIGHLIGHTS FY15 earnings were slightly below expectations Revenue growth contributed by ISG and klia2 retail PSC collection grew only +0.5%yoy Operating costs at +27% vs. topline growth of +43% ISG lost money due to seasonally weaker 4Q Maintain NEUTRAL with unchanged TP of RM6.35 FY15 earnings were slightly below expectations. MAHB reported FY15 core net loss of RM1.5m which was below both consensus and our estimate of a profit of RM10m-RM45m. The slightly disappointing results were due to higher depreciation and amortisation charges which rose 3- fold yoy and +21%qoq. Depreciation rose in tandem with pax growth in klia2 as the unit-of-production method was used (previously straight-line method). Amortisation has increased as a result of an upward revision of Istanbul Sabiha Gokcen (ISG) fair value. Revenue growth was contributed by ISG and klia2 retail. Revenue grew +43%yoy with full consolidation of ISG and LGM into MAHB. Excluding ISG s, MAHB s revenue would have increased +8%yoy contributed by: 1) Higher klia2 retail and F&B due to better performance by duty-free business Eraman; 2) Rental & commercial business due to higher lettable area with klia2; 3) Project & maintenance (Doha airport). Bread and butter business, PSC collection grew only +0.5%yoy. The passenger service charge (PSC) collections grew by a meagre +0.5%yoy in line with pax growth of +0.5%yoy. However, we expect an improvement in PSC revenue in FY16 as a result of higher pax growth forecast of +3%yoy. In addition, Malindo moving to KLIA main terminal which charges 50% & 100% higher PSC for domestic and international respectively compared to klia2 could also help. Cost-cutting efforts were made but more could be done. Operating costs increased at a smaller quantum of +27% vs topline growth of +43% as management made some efforts to cut costs, e.g. RM11m cost savings in utilities. We believe that there is room to reduce the growth in expenses further which could re-rate the stock. ISG lost money due to seasonally weaker 4Q. Net profit for ISG declined -82%qoq to EUR1.2m from EUR6.5m as a result of the winter season in Turkey. RETURN STATS Price (17 Feb 2015) Target Price Expected Share Price Return RM6.18 RM % Expected Dividend Yield +1.9% Expected Total Return +4.7% STOCK INFO KLCI 1, Bursa / Bloomberg Board / Sector Syariah Compliant 5014/MAHB MK Main/Trading Services No Issued shares (mil) 1,659.2 Par Value (RM) 1.00 Market cap. (RM m) 10,253.8 Price over NA wk price Range RM4.22-RM7.35 Beta (against KLCI) mth Avg Daily Vol 1.22m 3-mth Avg Daily Value Major Shareholders RM6.86m Khazanah 36.71% EPF 13.41% PNB 14.42% MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK Kindly refer to the last page of this publication for important disclosures
2 Maintain NEUTRAL with unchanged TP of RM6.35. We have reduced our FY16 earnings forecast by 3% to RM113m after imputing higher depreciation and amortisation charges. However, our Target Price of RM6.35 is unchanged as the DCF forecast for FY16 remains unchanged. Note that DCF valuation excludes depreciation and amortization as these are non-cash item. We maintain our NEUTRAL view on the stock. Potential rerating catalyst are: 1) Better than expected capacity growth from MAS-Emirates tie-up; 2) Deeper and more proactive cost-cutting measures to reduce operating costs; and 3) M&A activity and further details on KLIA Aeropolis project. Our valuation is based on DCF method (WACC: 7.7%, Beta: 1.1). INVESTMENT STATISTICS FYE Dec FY14 FY15 FY16F FY17F Revenue* (RM m) 2, , , ,267.8 EBIT (RM m) 1, Pretax Profit (RM m) PATAMI (RM' m) Core PATAMI* 67.5 (1.5) EPS (sen) 30.8 (0.1) EPS growth (%) (7.4) >(100) > PER (x) 20.1 N/A Net Dividend (sen) Net Dividend Yield * Excluding the effect of IC12 Source: MIDFR, MAHB DAILY PRICE CHART Source: Bloomberg Tay Yow Ken, CFA tay.yk@midf.com.my
3 MAHB: 12MFY15 RESULTS SUMMARY All in RM m unless stated otherwise Quarterly Results Cumulative FYE Dec 4Q15 %YoY %QoQ 12MFY15 %YoY Revenue 1, % 1.9% 3, % Revenue (excl. IC12) 1, % 1.9% 3, % Total expenses (649.4) -38.2% -18.0% (1,719.0) -27.2% Comments Contributions from ISG, higher retail & F&B, rental from klia2 and project & maintenance revenue (Doha airport) Increase in direct costs and staff costs EBITDA % -17.1% 1, % Depreciation & Amor. (268.2) % -21.4% (901.7) % EBIT % -51.6% % Finance cost (177.5) % 7.7% (741.8) % Higher due to klia2 depreciation and ISG amortisation Higher klia2 borrowing and ISG utilization fee Assoc. & JV % -97.2% % Pretax profit (58.1) % % % PATAMI (42.9) % % % Core PATAMI % -94.4% (1.5) % MAHB: BREAKDOWN IN REVENUE AND EXPENSES FYE Dec Quarterly Results Cumulative RM m 4Q15 %YoY %QoQ 12MFY15 %YoY Airport Operations: Aeronautical % -0.3% 1, % Comments -PSC & PSSC % -4.5% 1, % Boosted by ISG pax growth -Landing & Parking % -0.1% % -MARCS % 12.6% % -Airline incentives (0.6) 98.3% 89.5% (48.2) 55.2% -Others % 9.2% % Doha airport contracts Non-aeronautical % 6.8% 1, % -Retail % 18.6% % Higher sales per pax in klia2 -Rental % -2.0% % -Others % 10.9% % Larger lettable area and higher rental per square meter in klia2 Non-airport Operations: -Hotel % 14.7% % -Agriculture % -30.8% % -Project % -27.3% % 3
4 Expenses breakdown: Direct Costs: (187.8) -15.7% -6.3% (688.0) -20.3% -Direct materials (116.4) -13.7% -16.4% (402.7) -13.1% -Direct labour (32.3) -5.9% 19.0% (152.2) -23.9% -Direct overheads (39.1) -8.6% -6.5% (133.1) -43.0% Higher proportion of retail outlets in KLIA2 Operating Costs: (475.5) -84.2% -19.2% (1,794.8) -26.9% Staff costs (133.8) -13.2% 14.4% (606.5) -18.9% Salary increments and bonuses Utilities & comm. (82.7) -23.6% 3.6% (332.4) -15.2% Higher consumption from klia2 Maintenance (97.4) -49.8% -34.9% (306.5) -51.8% Larger terminal space at klia2 User fee (81.9) -9.1% -37.6% (282.1) -3.9% In line with pax traffic growth Others (79.7) % % (267.3) -87.8% Leasing of equipment for klia2 (e.g. security systems, trolleys) 4
5 MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad ( X). (Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad) DISCLOSURES AND DISCLAIMER This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for distribution only under such circumstances as may be permitted by applicable law. Readers should be fully aware that this report is for information purposes only. The opinions contained in this report are based on information obtained or derived from sources that we believe are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of the information contained therein and it should not be relied upon as such. This report is not, and should not be construed as, an offer to buy or sell any securities or other financial instruments. The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different results. All opinions and estimates are subject to change without notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF AMANAH INVESTMENT BANK BERHAD. The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may have interest in any of the securities mentioned and may benefit from the information herein. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS STOCK RECOMMENDATIONS BUY TRADING BUY NEUTRAL SELL TRADING SELL Total return is expected to be >15% over the next 12 months. Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been assigned due to positive newsflow. Total return is expected to be between -15% and +15% over the next 12 months. Total return is expected to be <-15% over the next 12 months. Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been assigned due to negative newsflow. SECTOR RECOMMENDATIONS POSITIVE NEUTRAL NEGATIVE The sector is expected to outperform the overall market over the next 12 months. The sector is to perform in line with the overall market over the next 12 months. The sector is expected to underperform the overall market over the next 12 months. 5
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