MAHB 6M18 passenger growth in line with forecast, says Kenanga

KUALA LUMPUR: Kenanga Research deems  Malaysia Airports Holdings Bhd's 6M18 passenger growth of 5.2% year-on-year to be in line with its 8.5% forecast as it expects stronger growth in the months ahead.

It said the growth was due to stronger growth numbers in the month boosted by festive seasons such as Hari Raya holiday season. 

"For June, passengers in Malaysia grew 9.7% YoY (international: +8.3%; domestic: 11.1%). Hari Raya was the main driver for the growth in June passenger traffic. That said, two weeks of
school holiday, which coincided with Hari Raya, was also one of the factors for the boost in traffic."

In June, KLIA Main grew 6.7% on year with international and domestic traffic increasing 7.3% and 4.5%, respectively while KLIA 2’s positive traffic growth continued at 12.5% (international: 6.5%; domestic: 25.2%).

Kenanga also noted that ISG Airport in Turkey recorded passenger frowth of 9.1% in June y-o-y due to similiar reasons, while its 6M18 passenger traffic grew at 12.4%.

The research house believes that the anticipated QUality of Service framework will be implemented by MAVCOM in 3Q18 for airports despute the news of its chairman's replacement.

"This could pose as downside risks for AIRPORT’s earnings given that MAVCOM has proposed a financial penalty of up to 5% of aeronautical revenue, which could dent our FY18E CNP by 7% for every 1% penalty. 

"That said, in order to mitigate penalties, AIRPORT has increased their planned CAPEX to RM600-700m (from typically RM300m) in FY18-19 to upgrade their infrastructure, i.e. trains, baggage systems and toilets."

Kenanga maintained market perform on the counter with an unchanged target price of RM8.60.