Nomura Research raises MAHB target price to RM11.18

PETALING JAYA: Nomura Research has raised the target price of Malaysia Airports Holdings Bhd (MAHB) to RM11.18 (from RM11.11) and lifted earnings by 11.1% and 7.3% for financial year 2018 (FY18F) and 2019 (FY19F) respectively on passenger service charge (PSC) equalisation.

Following the Malaysian Aviation Commission’s (Mavcom) announcement of a PSC equalisation at KLIA2 airport from Jan 1, 2018, whereby non-Asean international PSCs have been raised from RM50 to RM73 (versus assumption of RM55 in FY18F and RM60 in FY19F), the research house said it was raising its FY18F/19F core earnings estimates by 11.1%/7.3%.

“We estimate the increase in top line on PSC revenue (net of MARCS, or marginal cost support) to be around RM80mil and RM65mil for FY18F and FY19F respectively. Accompanying the PSC equalisation announcement, Mavcom is set to introduce an Airports Quality of Service framework to be implemented in Q3 18.

“But we believe Mavcom is singling out the responsibility only to the airport operator. We think the burden of responsibility should also be borne by airlines, customs and immigration. In terms of the outlook, the increase will not dent demand for air travel,’’ Nomura added.

The airport operator posted a higher third quarter net profit of RM79.69mil for the financial year ended September 30, 2017, compared with RMRM10.68mil a year ago. Revenue for the quarter rose marginally to RM1.2bil against RM1.1bil previously.

Meanwhile, Kenanga Research said it was maintaining a market perform call on the stock with an unchanged target price of Maintain MP with an unchanged TP of RM8.38 based on FY18E forward price-tobook-value (PBV) of 1.74 times (+1.5 standard deviation).

The brokerage said it believed the r applied +1.5 SD was fair given the better earnings prospects from the new PSC structure implemented since the beginning of FY17 and the operating agreement extension.

It noted that potential re-rating catalysts are stronger-than-expected recovery in Turkey, and higher-than-expected passenger growth in Malaysian operations.