February 5, 2014

Alliance maintains 'buy' on MAHB

Stock Name: AIRPORT
Research House: ALLIANCEPrice Call: BUYTarget Price: 10.46

Alliance Research has maintained its 'buy' call on Malaysia Airport Holdings Bhd despite news that it has yet to receive
the Certificate of Completion and Compliance for the klia2 terminal building.

In a note, the research firm said investors should accumulate MAHB shares on any sell-down due to potential delay in the opening of klia2 as its long-term fundamentals remain intact.

"MAHB continues to represent a lower risk alternative to airlines in order to ride on the Visit Malaysia Year 2014 investment theme.

"There are also various potential share price catalysts on the horizon such as favourable settlement in relation to the expropriation of its investments in Male International Airport, turnaround in Istanbul Sabiha Gokcen's financial performance, and extension of concession agreement to 2069," it added.

Alliance Research said it cannot rule out the possibility of a delay although the airport operator's management has remained firm in its commitment to the targeted opening date of May 2.

Even if the handover of the terminal building takes place this month, there may not be sufficient time to undertake the Operational Readiness and Airport Transfer process, which will require three months to complete.

"Nevertheless, we remain convinced that a short-term delay in the opening of klia2 represents only a temporary setback to MAHB with limited consequence on our discounted cashflow valuation as it will only have an impact on our financial year 2014 earnings forecast.

"Passenger traffic should remain robust as congestion at the low-cost carrier terminal (LCCT) is unlikely to deter holidaymakers from travelling," it said.

In addition, Alliance Research said any shortfall vis-'-vis its aeronautical revenue forecasts due to potentially slower passenger growth at LCCT could easily be compensated by the higher passenger service charges from Malindo which will continue to operate from the Main Terminal Building until klia2 opens.

Therefore, the only significant potential downside to earnings forecast would be lower rental income and retail revenue, due to less commercial floor space available in FY14.

Alliance Research has also kept the target price on MAHB unchanged at RM10.46, based on DCF valuation.

As at 10.58am, the airport operator's shares rose six sen to RM8.21 with 123,900 lots changing hands.-- Bernama

AirAsia X - TAAX ready to take off-MIDF-050214

Stock Name: AAX
Research House: MIDFPrice Call: BUYTarget Price: 1.45