Maybank IB keeps ‘Buy’ on MAHB on improving international passengers

by ANIS HAZIM / pic source: MAHB FB

MAYBANK Investment Bank Bhd (Maybank IB) has maintained its ‘Buy’ call on Malaysia Airports Holdings Bhd (MAHB) with a slightly higher discounted cashflow (DCF)-based target price (TP) of RM7.25 following the latter’s fast recovery in its international passenger traffic.

Analyst Yin Shao Yang said MAHB’s Turkish operation recorded a total passenger traffic of 81% in the six months of 2022 from the financial year of 2019 (FY19), while the international passenger traffic of the Malaysian operation is recovering faster than expected.

“Thus, we narrow our FY22E loss by 14%. While our FY23E earnings are unchanged, we are increasingly confident of our long-term earnings estimates,” Yin said in a research note today.

The analyst noted that MAHB’s domestic and international seat capacities are close to 90% and 50% of FY19 levels, respectively, from July 2022.

“Most encouragingly, we understand that Malaysian international pax hit 50,000 daily in the first few days of July 2022. 

“At this rate, July 2022’s Malaysian international passenger traffic could come in at 33% of pre-Covid levels,” he added.

Despite rising air fares due to surging jet fuel prices, Malaysian international passenger traffic has been improving due to the border reopening and the axing of Covid-19 testing requirements.

Maybank IB expects MAHB’s Malaysian international passenger traffic to continue recovering as travellers pass for returning Malaysians are removed.

“Note that Malaysian international passenger service charges (psc) are five to seven times that of Malaysian domestic psc and international pax can purchase duty free products,” he noted.

Additionally, MAHB saved RM700 million per annum in core costs including its staff, utilities and maintenance over the last two years in its Malaysian operation via staff attrition and renegotiating contracts. 

The analyst opined that the staff costs are unlikely to return to pre-Covid levels due to the natural attrition of 1,000 staff.

However, he viewed that the utilities, communications and maintenance costs will rise in tandem with passenger traffic but MAHB does not expect it to return to pre-Covid levels. 

“Post-Covid, MAHB expects Malaysian earnings before interest, taxes, depreciation and amortisation margin of 40%, seven points higher versus pre-Covid,” Yin added.

Thus, this would lift MAHB’s long-term earnings estimates by 15% per annum and DCF-based TP to RM7.80.