02 May 2017 1QFY17 Results Review Malaysia Airports Holdings Promising start to the year INVESTMENT HIGHLIGHTS MAHB had a promising start to the year International traffic drove up PSC, retail and rental revenue Increase our TP to RM8.05 But downgrade to NEUTRAL due to limited upside Partnership with Alibaba will not commence immediately A promising start to the year. MAHB reported 1QFY17 core PATAMI of RM62m which was a tad above our estimates, coming in at 28% of our full year forecast. A better than expected growth in international traffic was the main reason for the better than expected results. Better international traffic growth. First quarter revenue rose +7.3%yoy, almost identical to passenger traffic growth for the Group of +7.5%yoy. Positively, the ratio of international traffic to domestic traffic rose 1ppt to 50:50 at airports in Malaysia, as the sector grew a robust +9.5%yoy in the first quarter. This was partly contributed by a surge in Chinese tourists of +28%yoy. The higher proportion of international traffic has positive implications on PSC, retail and rental revenue, which together represent 75% of total revenue:- 1) The Passenger Service Charge (PSC) rate for international traffic is considerably higher compared to domestic traffic; hence a higher ratio of international traffic drove PSC revenue up +14%yoy for the Group. 2) International passengers have a higher average retail spend, spurring an increase in retail revenue by +12%yoy. 3) Higher retail revenue led to positive rental reversion rates with rental revenue per m² rising +16%yoy from RM2.5k to RM2.9k which led to a +8.1%yoy increase in rental revenue. Rosier outlook. We expect expenses to tick up in 2017 due to 1) staff salary increments, 2) higher maintenance expenditure in klia2 following the expiry of its defect liability period and 3) annual rise in user fee rate by at least 25 basis points per its operating agreement. However, this would be largely offset by lower quarterly depreciation charges of RM35m-RM38m following the extension of its operating agreement. In addition, passenger traffic at both Malaysian airports and ISGA looks to be gaining traction. ISG in particular performs better in the upcoming summer travel period, especially the high yielding international sector. Downgrade to NEUTRAL (From: BUY) Increased Target Price (TP): RM8.05 RETURN STATS Price (28 Apr 2017) Target Price Expected Share Price Return (From: RM7.75) RM7.60 RM8.05 +5.9% Expected Dividend Yield +1.6% Expected Total Return +7.5% STOCK INFO KLCI 1768.06 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) 12,609.86 Price over NA 1.63 52-wk price Range RM5.76 - RM7.68 Beta (against KLCI) 1.46 3-mth Avg Daily Vol 4.16m 3-mth Avg Daily Value Major Shareholders RM29.0m Khazanah 36.71% EPF 10.79% PNB 6.45% MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK Kindly refer to the last page of this publication for important disclosures
Downgrade to NEUTRAL but increase our TP to RM8.05 (from RM7.75). Having ascended +25.4% year-todate to RM7.60, which is just shy of our previous TP of RM7.75, we downgrade the stock to NEUTRAL with limited upside remaining. However, our TP is raised to RM8.05 following an upward revision to our FY17 earnings forecast by 6%. This follows the better the than expected international passenger traffic which has a positive effect on retail and rental revenue as well. Our TP is derived using the DCF method assuming WACC of 7.7% and Beta of 1.1. Partnership with Alibaba will not commence immediately. We opine that the recent run up in share price could also be partly due to an MOU signed between MAHB and Alibaba s logistics arm, Cainiao to explore the possibility of setting up an e-fulfilment hub for storage and distribution of e-commerce goods. However, details have yet to be finalised and could take 2 to 3 years before the first revenue is recognised, in our view. INVESTMENT STATISTICS FYE Dec FY15 FY16 FY17F FY18F FY19F Revenue* (RM m) 3,870.2 4,172.8 4,459.0 4,709.3 4,874.1 EBITDA (RM m) 1,679.1 1,709.9 1,911.4 2,066.6 2,148.2 EBIT (RM m) 777.5 857.4 1,000.4 1,166.6 1,213.1 Pretax Profit (RM m) 41.8 183.3 339.5 526.6 547.9 PATAMI (RM' m) 45.2 73.1 227.5 347.5 362.8 Core PATAMI* (RM m) (11.5) 77.5 227.5 347.5 362.8 EPS (sen) (0.7) 4.7 13.6 20.7 21.9 EPS growth (%) (102.2) 775.7 190.0 52.8 5.6 PER (x) N/A 162.6 56.1 36.7 34.8 Net Dividend (sen) 9.0 10.0 12.0 12.0 13.0 Net Dividend yield (%) 1.2 1.3 1.6 1.6 1.7 * Excluding the effect of IC12 Source: MIDFR, MAHB DAILY PRICE CHART Source: Bloomberg Tay Yow Ken, CFA tay.yk@midf.com.my 03-2173 8384 2
MAHB: 3MFY17 RESULTS SUMMARY All in RM m unless stated otherwise Quarterly Results Cumulative FYE Dec 1Q17 %YoY %QoQ 3MFY17 %YoY Revenue 1,093.6 7.3% 1.3% 1,093.6 7.3% Revenue (excl. IC12) 1,093.6 7.3% 1.3% 1,093.6 7.3% Total expenses (596.2) -5.2% 15.7% (596.2) -5.2% EBITDA 497.5 9.9% 33.5% 497.5 9.9% Depreciation & Amor. (227.9) 8.7% -141.0% (227.9) 8.7% EBIT 269.6 32.8% -3.0% 269.6 32.8% Finance cost (174.5) -3.4% 10.7% (174.5) -3.4% Assoc. & JV 4.8 18.6% 144.7% 4.8 18.6% Pretax profit 99.9 161.5% 18.1% 99.9 161.5% PATAMI 62.0 275.8% 86.1% 62.0 275.8% Core PATAMI 62.0 275.8% 68.7% 62.0 275.8% Source: Company, MIDFR MAHB: BREAKDOWN IN REVENUE AND EXPENSES FYE Dec Quarterly Results Cumulative RM m 1Q17 %YoY %QoQ 3MFY17 %YoY Aeronautical revenue 526.8 4.6% -1.4% 526.8 4.6% -PSC & PSSC 370.1 13.9% 2.3% 370.1 13.9% -Landing & Parking 94.7 4.2% -2.9% 94.7 4.2% -MARCS 42.6-22.1% -18.1% 42.6-22.1% -Airline incentives (17.8) -40.2% 5.8% (17.8) -40.2% -Others 37.2-18.2% -10.6% 37.2-18.2% Non-aeronautical 491.8 9.0% 2.3% 491.8 9.0% -Retail 204.7 11.6% -1.1% 204.7 11.6% -Rental 247.0 8.1% 11.1% 247.0 8.1% -Others 40.1 2.3% -22.1% 40.1 2.3% Non-airport Operations: 75.0 15.7% 15.6% 75.0 15.7% -Hotel 25.0 13.6% -6.4% 25.0 13.6% -Agriculture 10.5 54.4% -5.4% 10.5 54.4% -Project 39.5 9.7% 45.8% 39.5 9.7% 3
Expenses breakdown: Direct Costs: (651.2) -7.6% 9.4% (651.2) -7.6% -Direct materials (184.7) -12.2% 4.5% (184.7) -12.2% -Direct labour (116.2) 0.3% 8.6% (116.2) 0.3% -Direct overheads (38.1) -2.0% 24.8% (38.1) -2.0% Operating Costs: (30.4) -5.5% 17.8% (30.4) -5.5% -Staff costs (466.5) -2.5% 18.9% (466.5) -2.5% -Utilities & comm. (145.5) 0.4% 9.0% (145.5) 0.4% -Maintenance (82.4) -9.3% 31.6% (82.4) -9.3% -User fee (78.9) -13.5% 16.1% (78.9) -13.5% -Others (94.3) -5.0% 6.7% (94.3) -5.0% Source: Company, MIDFR 4
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - 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