MAHB’s traffic growth normalising, future growth to come from operating leverage
KUALA LUMPUR: Traffic growth at Malaysia Airports Holdings Bhd’s (MAHB) airports have reverted to its normal rate and analysts believe that the airport operator’s future growth could come from a possible strategy to improve cost efficiency and boost unit revenues.
Maybank Investment Bank Bhd’s research arm (Maybank IB Research) in a recent report, pointed out that MAHB’s September 2017 operating statistics were an eye opener as Malaysian traffic growth eased to 3.6 per cent year-on-year (y-o-y) while Istanbul’s SGIA traffic accelerated to 7.9 per cent y-o-y.
It believed that this numbers could suggest that the double-digit traffic growth in Malaysia (since July 2016) has passed and is now trending toward historical growth rates of mid-single digit, and SGIA traffic growth is accelerating back to its historical average growth rate of around eight per cent.
“Going forward, it is unlikely that MAHB can sustain doubledigit traffic growth given that the industry is close to maturity.
“Therefore, management needs to boost unit revenues and focus on cost efficiency to drive future earnings,” it suggested.
It noted that the unit revenue trend is positive thanks to the strong growth in international traffic (higher passenger service charge and ability to buy duty-free goods). It also pointed out that cost efficiency has shown some notable improvements in the past two quarters.
Overall, Maybank IB Research highlighted that MAHB’s earnings and cashflow outlook is positive driven by operating leverage.
“However, we think all the positives have been priced in as seen by its valuations — enterprise valuations per earnings before interest, tax, depreciation and amortisation and price per book value are hovering at a ten year peak.
“Taking a look purely at fundamentals, we believe MAHB risk-reward is fairly balanced and hence our ‘hold’ call,” it concluded.