KUALA LUMPUR: CIMB Equities Research was caught by surprise over MALAYSIA AIRPORTS HOLDINGS BHD’s (MAHB) losses in the second quarter ended June 30, 2014 as costs soared following KLIA2's launch in May.
It said on Friday the losses drove 1H14 core net profit below expectations at 27% of its full-year forecast.
“We cut our FY14-16 estimates to reflect slower traffic growth and higher depreciation, interest and operating expenses, lowering our DCF-based target price.
“While 2Q14's loss creates uncertainty in MAHB's near-term financial performance, the loss may provide furtherimpetus for its tariff equalisation agenda. Maintain Hold,” it said.
It also lowered the target price from RM8.07 to RM7.50.
CIMB Research said MAHB plunged into a core net loss of RM23mil in 2Q14 following KLIA2's opening in May 2014, which resulted in a dramatic rise in depreciation, utility and interest costs.
Passenger traffic growth slowed to 6% yoy from 18% yoy in 1Q14 after traffic at KLIA Main Terminal Building (MTB) declined following the MH370 incident but the key focus of the quarter's results was undoubtedly cost.
Although KLIA2 has only been operational for two months as at 2Q14, depreciation and interest costs have already surged 108% and 385% on-year,respectively, suggesting that costs will rise even faster in subsequent quarters.
“With 2Q14's loss, 1H14's net profit came to RM92mill, some 42% lower on-year,” it said.
CIMB Research pointed out that with KLIA2-related costs bearing its full force in 2H14, MAHB will likely stay in the red in 2H14. A sizeable portion of KLIA2's capex will be fully depreciated within 10 years, resulting in outsized charges in the early life of the low-cost terminal.
Monthly passenger traffic growth has also plunged since May 2014 to 2%-4% yoy, a far cry from the double-digit growth seen earlier this year.
“We cut our 2014 pax traffic growth estimate from 11.2% yoy to 7.7% yoy, in line with CAPA's estimated 8% seat capacity expansion out of KL this year. The magnitude of MAHB's cost increase has caught us off guard and results in considerable uncertainty in MAHB's financial performance in subsequent quarters.
“The loss may, however, serve as further justification for a stronger push for tariff equalisation between KLIA MTB and KLIA2. A 50% narrowing in the tariff gap between KLIA MTB and KLIA2 will see our target price rise to RM9.67 a share,” it said.
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