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Malaysia Airports targets 5%-7% passenger growth in 2017

Monday, 23 January 2017

SEPANG: Malaysia Airports Holdings Bhd (MAHB) is targeting 5%-7% passenger growth this year while it works diligently towards closing some deals to kick-start the development of KLIA Aeropolis cargo-logistics-aerospace hub.

It plans to set up its first special purpose vehicle (SPV) for that purpose and is in talks with infrastructure funds from Employees Provident Fund and Permodalan Nasional Bhd to fund and develop 300-400 acres for the cargo, logistics and aerospace development.

According to MAHB managing director, Datuk Badlisham Ghazali, they were in talks with aircraft and parts makers such as Airbus, Boeing, General Electric and global cargo players to set up some plants in the area.

“We cannot take on the entire development. We are open to talks with players to set up the SPV. The equity in the SPV can be discussed, we are open about it.

“In the case of Mitsui Outlet Park, we had 30% and we can go with that level,’’ he said in an interview.

MAHB is spearheading efforts to turn the KL International Airport (KLIA) into a world-class airport city under the KLIA Aeropolis initiative.

Thus far, the Mitsui Outlet Park KLIA is up and running, and works on the second phase is expected to be completed in 2018. This outlet is one of the three clusters in the 24,710-acre development surrounding KLIA.

There will also be air cargo and logistics, aerospace and aviation parks, and meetings, incentives, conventions and exhibitions and leisure facilities. All these are expected to boost MAHB’s non-aeronautical income stream, which is about 50% now.

“We expect to make some announcements in the second half of the year on the cargo-logistics-aerospace development,’’ he said.

MAHB also manages 39 airports in the country and ended 2016 with a 6% growth rate to 88.83 million passengers. It beat its earlier forecast of 2.8%, and the extra passengers was led by more intense competition which led to higher passenger traffic and the return of the China traffic.

This year, Badlisham is estimating a 5%-7% broad growth but will refine the figures and announce its KPI headline numbers in February.

Nomura Research said in a recent note that Malaysia and the Philippines saw demand growth outpacing capacity, thus driving yields higher in 2016.

Malaysia had on Jan 1 introduced the new passenger service charges (PSCs) and when asked if MAHB would make more money with the new PSCs, Badlisham said “the impact will be neutral this year’’.

“With more growth and airlines thickening their routes, it bodes well for us,’’ he said.

This year the local airlines will deploy more than 20 aircraft locally and 40 regionally at their various bases in Asean. He said the umrah traffic was also growing steadily and that would increase passenger numbers besides the effort to get more China traffic into Malaysia.

He said more people are flying for various reasons and MAHB wants to ensure it provides the type of comfort passengers expect at its airports.

Towards this end, he is talking about investing more to improve services, especially amenities and facilities at all airports. His theme of optimisation had been on since last year and will be driven further this year as he relooks space usage at all the airports, especially KLIA, to ensure there is better return on investment.

He said there would be some capex investment on improving services and facilities but did not diverge any numbers.

For now, KLIA is built to manage 25 million passengers but in reality it can handle 30-35 million with better automatisation.

Normura Research expects robust earnings growth of 448.6% in financial year 2017 on the back of depressed earnings bottoming this year, underpinned by the 4.8% growth in passenger traffic (Malaysia), increase in the PSCs and higher retail spending.

“In the absence of any near-term onerous capex should boost MAHB’s future free cashflow. There could be more upside to our forecasts on the back of a few key catalysts such as MARCS arrangement to be enforced and the extension of the operating agreement.

Besides asking for lease land extensions for Aeropolis from 2034 to a further 60 years, it was also hoping for an extension to its concession for all the airports in the country.

Normura maintains its “buy” call on the stock and its two-month target stock price is RM8. The stock closed 10 sen lower to RM6.15 a share on Friday.

Bloomberg’s consensus 12-month target price is RM7.02, with eight houses having a “buy” call on the stock, four houses a “sell” call and six a hold call.

Bloomberg consensus revenue for FY2017 is RM4.4 billion, while net profit is RM200.4 million with earnings per share (EPS) of 12 sen.

As for FY2016, revenue is estimated at RM4.2 billion, while net profit is RM80 million and EPS at 4 sen.

Source by: Internet

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