Stock Name: AIRPORT
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: MAYBANK
Malaysia Airports Holdings Bhd
(May 11, RM6.15)
Maintain buy at RM6.15 with target price of RM7.12: MAHB will release its 1QFY11 results on May 12. Seasonally, 1Q is a soft quarter. Based on the published operating statistics, we expect a core net income (net income less forex translation and all other non-cash items) of RM129 million (40.8% year-on-year, 24.8% quarter-on-quarter). MAHB is our top aviation pick, as it has the lowest risk profile coupled with impressive growth prospects. We maintain our 'buy' call with no change to our RM7.12 discounted cash flow-based target price.
Passenger numbers were better than expected with a better profile mix. Passenger growth in 1QFY11 was 11.9% y-o-y, higher than management's guidance of 8% growth for 2011. Cargo remained flat, in line with the global soft trend. International passengers made up 49%, a 0.7 percentage point rise y-o-y. This will translate into higher revenue as international passengers pay higher service charges.
MAHB's passenger traffic growth of 11.9% in 1QFY11 has significantly outpaced the Asia-Pacific average growth of 5% and world average growth of 4%. KLIA continues to outclass its regional peers with a growth rate of 12.4% in 1Q11 ' a 2.9 to 7.9 percentage point outperformance.
The Japan and the Middle East and North Africa (MENA) market collectively accounts for 6% of world air traffic capacity. But the impact on MAHB of civil unrest/natural disaster in those markets was negligible. We estimate that there are collectively 31 weekly flights to Japan and twice weekly flights to affected MENA regions from MAHB's airports; this is less than 2% of total capacity.
We maintain our earnings forecast for now pending management's input. We believe the current high utilisation of KLIA (approximately 85%) underpins strong profitability because there is high operational leverage for this infrastructure business. MAHB is highly attractive compared to global peers: 9.6 times price-to-cash flow ratio (58% discount to peers), 9.2% return on capital (28% higher) and it is lowly geared at 0.33 times against the peer group average of 0.69 times. ' Maybank IB Research, May 11
This article appeared in The Edge Financial Daily, May 12, 2011.
Company Name: MALAYSIA AIRPORT HOLDINGS BHD
Research House: MAYBANK
Malaysia Airports Holdings Bhd
(May 11, RM6.15)
Maintain buy at RM6.15 with target price of RM7.12: MAHB will release its 1QFY11 results on May 12. Seasonally, 1Q is a soft quarter. Based on the published operating statistics, we expect a core net income (net income less forex translation and all other non-cash items) of RM129 million (40.8% year-on-year, 24.8% quarter-on-quarter). MAHB is our top aviation pick, as it has the lowest risk profile coupled with impressive growth prospects. We maintain our 'buy' call with no change to our RM7.12 discounted cash flow-based target price.
Passenger numbers were better than expected with a better profile mix. Passenger growth in 1QFY11 was 11.9% y-o-y, higher than management's guidance of 8% growth for 2011. Cargo remained flat, in line with the global soft trend. International passengers made up 49%, a 0.7 percentage point rise y-o-y. This will translate into higher revenue as international passengers pay higher service charges.
MAHB's passenger traffic growth of 11.9% in 1QFY11 has significantly outpaced the Asia-Pacific average growth of 5% and world average growth of 4%. KLIA continues to outclass its regional peers with a growth rate of 12.4% in 1Q11 ' a 2.9 to 7.9 percentage point outperformance.
The Japan and the Middle East and North Africa (MENA) market collectively accounts for 6% of world air traffic capacity. But the impact on MAHB of civil unrest/natural disaster in those markets was negligible. We estimate that there are collectively 31 weekly flights to Japan and twice weekly flights to affected MENA regions from MAHB's airports; this is less than 2% of total capacity.
We maintain our earnings forecast for now pending management's input. We believe the current high utilisation of KLIA (approximately 85%) underpins strong profitability because there is high operational leverage for this infrastructure business. MAHB is highly attractive compared to global peers: 9.6 times price-to-cash flow ratio (58% discount to peers), 9.2% return on capital (28% higher) and it is lowly geared at 0.33 times against the peer group average of 0.69 times. ' Maybank IB Research, May 11
This article appeared in The Edge Financial Daily, May 12, 2011.
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