MALAYSIA AIRPORTS HOLDINGS BHD

TA SECURITIES Research has maintained its FY17 passenger growth assumption of 6.7% for Malaysia Airports Holdings Bhd’s (MAHB) Malaysian operations after taking into account the high base effect.

Passenger movement in H2’16 grew at a faster rate of 9.1% year-on-year compared to 1.7% in H1’16.

Meanwhile, traffic movement at its unit Istanbul Sabiha Gokcen International Airport (ISG) for H2’17 is expected to grow strongly due to the low base effect as H2’16 volume was affected by the terrorist attack and military coup.

As such, the research house said it was also maintaining its passenger growth assumption of 7.2% for ISG, in line with management guidance.

It maintained its “sell” call on MAHB and its discounted cash flow (DCF) valuation at RM8.10 per share based on discount rate of 11.7%.

“After a strong rally in share price, which appreciated 53.1% year-to-date, the upside potential of the stock has diminished,” it said.

MAHB reported that total passenger movement for May 2017 increased by 8.5% year-on-year to 8.1 million for Malaysia’s traffic.

This was led by a 15.2% growth in the international segment and 2.4% growth in the domestic segment.

“Similar to previous four months, the strong international segment was due to higher growth from Europe and North East Asian destinations.

“Meanwhile, according to management, the 2.4% marginal growth in the domestic segment was mainly contributed by Malindo Air, offsetting the reduction posted by Firefly and Malaysia Airlines,” it said in a note.

The ISG airport recorded a 0.3% increase in passenger movement in May 2017 with positive growth in the international segment offsetting a decline in the domestic segment. The research house noted that this was the third positive year-on-year growth in 2017, signalling the impact of military coup and terrorist attack in Istanbul had diminished.