Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: OSK
Malaysia Airports Holdings Bhd (MAHB)
(April 2, RM4.95)
Maintain trading buy at RM4.80 with target price of RM5.50: MAHB has launched "Runway To Success: Building A World-Class Airport Business 2010-2014".
We are generally pleased with the five-year business direction placing aeronautical revenue as the backbone supported by a conservative traffic growth of 4.1%, its aim to nurture its retail business, expanding its horizon to strategic land development and boosting its overseas earnings five years from now.
The key target is to achieve earnings before interest, tax, depreciation and amortisation (Ebitda) of RM822 million on a base-case scenario and RM1.12 billion on an optimistic case for FY14.
Being an airport operator, air traffic growth remains MAHB's underlying fundamental. The company has estimated a base growth rate of 4.1% compound annual growth return (CAGR) from 2008 to 2014, which may offer some upside given the robust growth in the low-cost carrier segment and other Asian markets.
Nevertheless, as its earnings projection incorporates a potential increase in passenger service charges in 2014 as well as 30% increase in landing charges plus other aeronautical charges in May 2011, we may see some road blocks covered by the marginal cost support agreed to by the government under the operating agreement.
MAHB has big plans to raise its non-aeronautical contribution to 67.1% by 2014, or by an absolute revenue of RM2.1 billion, from RM860.6 million.
Going forward, the company has established clear plans to grow the retail business by introducing the right products at the right locations.
MAHB has identified 2,730 acres (1,105ha) of land surrounding the KLIA for development. While the management has guided for rental on the high side and has a bullish revenue projection of RM112 million by FY14, we are upbeat on its potential, given its previous success in developing Malaysia International Aerospace Centre at Subang Airport.
The company has also been building its name in airport management overseas, having three such ventures under its belt. It is also bidding for two airport management jobs in Asia, and hopes to secure these by year-end. However, these investments will bear fruit only after a five-year gestation period.
We maintain our trading buy recommendation with a target price of RM5.50 based on 16 times FY10 earnings per share. - OSK Research, April 2
This article appeared in The Edge Financial Daily, April 5, 2010.
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: OSK
Malaysia Airports Holdings Bhd (MAHB)
(April 2, RM4.95)
Maintain trading buy at RM4.80 with target price of RM5.50: MAHB has launched "Runway To Success: Building A World-Class Airport Business 2010-2014".
We are generally pleased with the five-year business direction placing aeronautical revenue as the backbone supported by a conservative traffic growth of 4.1%, its aim to nurture its retail business, expanding its horizon to strategic land development and boosting its overseas earnings five years from now.
The key target is to achieve earnings before interest, tax, depreciation and amortisation (Ebitda) of RM822 million on a base-case scenario and RM1.12 billion on an optimistic case for FY14.
Being an airport operator, air traffic growth remains MAHB's underlying fundamental. The company has estimated a base growth rate of 4.1% compound annual growth return (CAGR) from 2008 to 2014, which may offer some upside given the robust growth in the low-cost carrier segment and other Asian markets.
Nevertheless, as its earnings projection incorporates a potential increase in passenger service charges in 2014 as well as 30% increase in landing charges plus other aeronautical charges in May 2011, we may see some road blocks covered by the marginal cost support agreed to by the government under the operating agreement.
MAHB has big plans to raise its non-aeronautical contribution to 67.1% by 2014, or by an absolute revenue of RM2.1 billion, from RM860.6 million.
Going forward, the company has established clear plans to grow the retail business by introducing the right products at the right locations.
MAHB has identified 2,730 acres (1,105ha) of land surrounding the KLIA for development. While the management has guided for rental on the high side and has a bullish revenue projection of RM112 million by FY14, we are upbeat on its potential, given its previous success in developing Malaysia International Aerospace Centre at Subang Airport.
The company has also been building its name in airport management overseas, having three such ventures under its belt. It is also bidding for two airport management jobs in Asia, and hopes to secure these by year-end. However, these investments will bear fruit only after a five-year gestation period.
We maintain our trading buy recommendation with a target price of RM5.50 based on 16 times FY10 earnings per share. - OSK Research, April 2
This article appeared in The Edge Financial Daily, April 5, 2010.
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