Bullish outlook for MAHB on rising passenger traffic, PSC hike

PETALING JAYA: Malaysia Airports Holdings Bhd’s (MAHB) growth is expected to be driven by rising passenger traffic and the upcoming hike in passenger service charges (PSC).

Maybank Investment Bank (Maybank IB) Research said it remains bullish on MAHB and expects the group’s results in the fourth quarter of 2023 (4Q23) to come in strong.

The research house noted MAHB’s 4Q23 results are inclined to be weaker quarter-on-quarter (q-o-q) because of back loading of expenses like staff costs and maintenance towards year end.

“For 4Q23, we understand that this may no longer be the case as MAHB has provisioned for staff bonuses throughout the year, offsetting Istanbul Sabiha Gokcen’s potentially higher expenses q-o-q on higher maintenance and security costs in tandem with higher passenger (pax) traffic,” the research house said in a report yesterday.

Maybank IB Research said foreign airlines are showing more interest in flying to Malaysia than prior to the Covid-19 pandemic. The research house added that as at 3Q23, the pax carried by foreign airlines into the country had recovered to pre-Covid 19 levels.

“MAHB also stated that it has received inquiries for more airport slots from Chinese airlines since Malaysia waived visa requirements for Chinese visitors effective Dec 1, 2023. Recall also that major foreign airlines like Lufthansa, British Airways and Qantas are due to return flying to Kuala Lumpur in the second half of 2024,” the research house said.

Maybank IB Research said this was crucial as the PSC charged on foreign pax traffic in the country was five to seven times that of the domestic one.

“PSCs in Malaysia will still be hiked by the historical five-year cumulative consumer price index minus 0.1% on Feb 11, 2024 as stipulated under its current operating agreement (OA) with or without the new OA,” the research house said.

The third consultation paper that is supposed to guide MAHB’s new OA with the government is still not released yet by the Malaysian Aviation Commission.

“Our forecasts have imputed the new PSCs. If the new OA comes into effect past Feb 11, 2024, the new aeronautical charges can be applied prospectively,” Maybank IB Research said.

Maybank IB maintained a “buy” call on MAHB with a target price of RM8.53 and expects MAHB’s 4Q23 core net profit to come in at RM95mil to RM100mil (3Q23: RM80.3mil).

The research house said upside factors include competition among domestic airlines which will drive passenger traffic growth; policy changes as visa requirements relaxations and tourist friendly events will spur passenger traffic growth; and the regulated asset base framework that will guarantee a certain return for every ringgit of capital expenditure invested.

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