KUALA LUMPUR KEPONG BHD

3% y-o-y.

“We believe the overall increase in international traffic was due to visa relation for India and China, competitive fares as well as the favourable exhange rate for foreign tourists.

“The decrease in domestic demand is due to capacity cuts from Malaysia Airlines and Malindo Air as they rationalised their capacity allocations and this was partially masked by increased capacity by AirAsia,” Kenanga said, adding that average load factor was at 74.1%.

In terms of KL International Airport’s (KLIA) traffic review, the house said that last month KLIA registered 1.5% growth y-o-y with international passengers growing 11.7%, while domestic traffic contracted 25.7%.

Kenanga explained that KLIA’s growth was supported by increased seat capacities by airlines (Malindo Air, Xiamen Airlines, Hong Kong Dragon Airlines, Saudi Arabian Airlines and Emirates) and stronger travel demand.

The domestic contraction was due to reduction in capacity by Malaysia Airlines, Firefly and Malindo Air.

Meanwhile, KLIA2’s traffic growth continued at 14.2% y-o-y (14.2% for international and 14.3% domestic).

Kenanga believed this was due to strong growth from AirAsia and AirAsia X as they increased capacity through higher utilisation of planes.

On ISG airport, Kenanga said passenger growth for November posted ninth consecutive 10.9% y-o-y growth in FY17.

“This is an encouraging growth for the 11 months in Turkey, given that it previously posted negative y-o-y growth since the slew of events that shook Turkey in FY16.

“We maintain our 7% forecast and look for strong growth in December,” Kenanga said, keeping a ‘market perform’ call on the stock with unchanged target price of RM8.38.

Rerating catalysts include stronger-than-expected recovery in Turkey and higher-than-expected passenger growth in Malaysian operations. Risks include lower-than-expected travel demand and threats in Turkey. Target price: MIDF Research is neutral on Kuala Lumpur Kepong Bhd’s (KLK) plan to acquire Elementis Specialities Netherlands BV (ESN) in Delden, the Netherlands.

The research house noted that KLK intends to use ESN’s site located at Delden, the Netherlands as another hub for the group’s market penetration strategy.

“This should strengthen KLK’s downstream chemical specialties business in Europe. “We are neutral on the deal as we do not expect significant earnings impact in both FY18 and FY19 as the primary driver for downstream segment profitability is still the raw material costs,” it said in a note.

It added that funding was not an issue for the group as KLK has cash of RM2.04bil with low net gearing of 0.21x.

KLK announced on Tuesday that it plans to buy ESN for 39mil or RM187.2mil.

In a filing with Bursa Malaysia, the plantation company said its unit Kolb Distribution AG had inked a deal with Elementis BV to acquire its entire interest in ESN, together with its working capital, assets and surfactant chemicals business.

The proposed acquisition will be funded by a combination of KLK’s existing cash reserves and bank borrowings, the company said, adding that the proposed acquisition is expected to be completed in the first half of 2018.

ESN is mainly involved in the manufacture of surfactants.

MIDF Research noted that surfactant was among the chemicals in detergents, which in turn is an oleochemical product.

It maintained its earnings estimates for the group, with FY18 core net income (CNI) expected to come in at RM1.15bil.

The research also maintained its FY19 CNI forecast of RM1.33bil.

It maintained its Buy call on the counter due to its high exposure to palm oil business and good track record of earnings delivery.