Passenger growth at MAHB in line with estimates

KUCHING: Malaysia Airports Holdings Bhd’s (MAHB) passenger growth in February came in at 6.3 per cent year on year has come in line with estimates to date, driven by the group’s domestic operations due to increased travel demand.

As per a filing on Bursa Malaysia, MAHB’s passenger traffic snapshot for February 2017 indicated that the total MAHB System - including Istanbul Sabiha Gocken International Airport (ISG) - registered growth of 6.3 per cent y-o-y-YTD, from 18.28 million to 19.43 million.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), this was in line with its 6.3 per cent target (up six per cent target for Malaysian operations; up seven per cent target for Turkey operations) as it was driven by MAHB’s Malaysian operations mainly due to increased travel demand.

MAHB also noted that KLIA Main Terminal’s double digit growth streak continued with 28.3 per cent recorded over February 2016 passengers. International and domestic passengers registered 28.5 per cent and 27.8 per cent growth rates, respectively.

“We believe the growth is mainly supported by Malaysia Airlines Bhd (MAB)’s increased frequencies coupled with Malindo and Lion Air’s shift from KLIA 2 to KLIA Main since March 2016,” Kenanga Research said.

On ISG passengers, MAHB highlighted that numbers declined by 5.5 per cent in February 2017 over the same period last year.

“The international and domestic sector decreased by 3.1 per cent and 6.6 per cent respectively,” the group said.

Kenanga Research believed the poor passenger traffic was partly due to heavy fogs and bad winter causing multiple flight cancellations and hence the poor traffic.

Meanwhile, the research firm noted that international traffic has been severely subdued registering YTD passenger decline of 5.9 per cent due to numerous terror attacks in Turkey in 2016 - further deterring travellers.

The research arm also believed travel sentiment from the international front will continue to remain weak from the travel concerns in Turkey and it would likely have to further reduce its seven per cent growth target for ISG in financial year 2017 ( FY17) should passenger count continue to disappoint by the end of the first quarter of 2017 (1Q17).

Post review of February traffic figures, Kenanga Research made no changes to its FY17-18E earnings forecasts.

All in, Kenanga Research maintained ‘outperform’ with an unchanged target price of RM7.42 per share in view of the better earnings prospect from the new passenger service charge ( PSC) structure coupled with the extended operating agreement recently implemented.