RHB says "buy" MAHB despite KLIA2 possible delay as fundamentals promising

Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Thursday, 25 April 2013 17:34
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KUALA LUMPUR (April 25): RHB Research advises investors to buy
Malaysia Airports Holdings Bhd (MAHB) shares despite there is a
possibility that KLIA2’s opening will be delayed.
“While such concerns (of a delay in the opening) will hit investors’
sentiment, we advocate accumulating on any share price weakness as
the fundamentals and growth prospects of MAHB remain promising,”
said RHB analyst Ahmad Maghfur Usman in a note today.
As such, he maintains his “buy” call on MAHB, with an unchanged target
price of RM7.23.
At 4:08 pm, MAHB shares were up by three sen to RM5.88. A total of
1.22 million shares were traded.
“There is possibility that completion of the Kuala Lumpur International
Airport 2 (KLIA2) will be delayed. The key question is for how long and
whether there will be any cost overruns,” Maghfur said in the note.
He added that MAHB’s management has maintained that
CONSTRUCTION [] is on track to open on June 28, 2013, though he
views that this stance may possibly change.
In the case of a delay, RHB will cut down MAHB’s revenue forecast by
4% for the latter’s financial years ended December 31, 2013 (FY13)
and December 31, 2014 (FY14), due to lower rental and passenger
spending.
“However, this will be offset by lower operational costs and hence, the
downward revision in earnings before interest, depreciation, tax and amortisation (EBITDA) would be by 1% only in FY13 but
by as much as 9% for FY14 and 5% in FY15 onwards, as we assume more improved earnings to kick in a year earlier,”
Maghfur explained.
He added significant costs overruns would unlikely be passed through to MAHB as the delays are not caused by the variation
of its order – its fixed contractual terms imply that the risks of higher costs will be borne by the contractors.
On the group's first quarter (1QFY13) results, Maghfur expects its earnings "to be within expectations".
He projects MAHB's core net profit to be RM95 million or 13% lower than the previous corresponding period, though revenue
will be 11% higher at RM730 million.
"Though revenue is projected to rise on the back of higher passenger volume (up 8% year-on-year) and passenger spending,
we anticipate that its bottom line will be lower due to the higher user fee incurred, which is expected to double on a full year