MAHB upgraded on potential upside surprises in 2H23

MALAYSIA Airports Holdings Bhd (MAHB) has been upgraded to ‘add’ from ‘hold’ at CSG-CIMB Research as the research house expects re-rating catalysts and potential upside surprises in the second half of this year, plus an expected dividend yield of 4.5% in 2024.

“In addition to our expectation for strong 2H23F results due to continuing passenger traffic recovery, stronger commercial rental collections, and higher Eraman duty-free sales, we also expect several potential positive catalysts from the regulatory side,” CGS-CIMB said in a note released today.

It has upped the 52-week target price for MAHB to RM7.76 from RM7.10. The stock was trading at RM7.26 at 11am today (Sept 14).

Bloomberg consensus for the airport operator counter — managing 39 airports across Malaysia and one international airport in Turkey — is 12 ‘buy’, six ‘hold’ and one ‘sell’.

In the first months of 2023, MAHB said that an average of only 67% of the tenanted commercial lots across all its airports in Malaysia were actually open for business, and out of goodwill, MAHB waived the rentals on 33% of the tenanted lots that remain closed.

Of the tenants that are paying rental, CGS-CIMB Research estimated that MAHB gave a 30% discount on the basis that passenger traffic had not fully recovered to pre-Covid levels.

“In essence, MAHB only collected 47% of the rentals that it was entitled to collect during 1H23, with the remaining 53% lost to both rental waivers or discounts, in our view. The good news is that MAHB expects all of these shops to be open by the end of this year, hence there should be zero rental waivers and discounts in FY24F.

“Consequently, we forecast rental and commercial revenues to rise 39.5% yoy to RM782m in FY24F, or 14% higher than FY19 due to MAHB’s successful ‘commercial reset’ programme which has permanently increased base rentals, contributing a 27 sen hike to our SOP valuation in this report,” it said.

In the second quarter ended June 30, 2023 (2Q23), MAHB posted a net profit of RM102.53 million on the back of turnover of RM1.23 billion, compared to a net loss of RM58.15 million on RM689.76 million in the same period the previous year.

For the first half, it posted a net profit of RM160.72 million compared to a net loss of RM162.91 million in 1HFY22, on the back of RM2.27 billion in turnover.

MAHB’s major shareholders are Khazanah Nasional Bhd (33.2%),  Employees Provident Fund (15.1%) and Permodalan Nasional Bhd (6.9%). — TMR / pic MUHD AMIN NAHARUL