Malaysian Airports 1HFY22 results missed forecast but met market expectations. Kenanga expects further improvement in passenger numbers entering 2H 2022 however, the recent proposal by MAVCOM to keep tariffs unchanged could significantly raise MAHB’s earnings risk. Due to this, the research house is cutting FY22F net profit by 53% but maintains TP of RM6.05.
MAHB reported a net loss of RM163m in 1HFY22, vs. a fullyear net profit forecast of RM268m and the full-year consensus estimates of an RM219m net loss. Kenanga considers the results below its forecast but in line with market expectation. The variance against the forecast came largely from lower-than-expected passenger throughput. Revenue rose 90% in tandem with a 3-fold increase in passenger throughput to 34m (50% of pre-COVID volume). Specifically, passenger throughput in Malaysia rose to 20m compared to 3m in 1HFY21. Similarly, in Turkey, passenger throughput rose 53%. Consequently, airport operations revenue rose 100% due to higher aeronautical (+124%) and nonaeronautical (+75%) segments.
A recent proposal to keep airport tariffs status quo could work against MAHB’s ability to generate enough cash flow for CAPEX purposes, particularly for airport expansion and maintenance. While MAVCOM also proposes a mechanism for MAHB to recoup losses incurred during RP1 in RP2, the research house is concerned over MAHB’s cash flow over RP1. While the proposals in this MAVCOM consultation paper are not cast in stone, they do significantly raise MAHB’s earnings risk over the medium term.
Kenanga downgrades its FY22F net profit by 53% as it lowers passenger numbers in FY22 from 80m to 72m. TP of RM6.05 is based on 22x FY23F EPS or at 40% discount to the closest peer Airport in Thailand due to its smaller market capitalisation. Note that Thailand’s tourism revenue is 3x larger than Malaysia’s.
Risks to call include, endemic and pandemic occurrences, deterring air travel, unfavourable terms for airport operations; and risks associated with overseas operations.
