Credit Suisse: MAHB traffic outlook remains strong, maintain "outperform"

Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Monday, 29 April 2013 15:33
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KUALA LUMPUR (April 29): Credit Suisse is retaining its “outperform”
rating on Malaysia Airports Holdings Bhd (MAHB) with an unchanged
target price of RM6.80, on the back of the airport management group’s
strong traffic outlook.
At 3:04 pm, MAHB shares were traded unchanged at RM6 and had
crept up by two sen for intraday high. A total of 2.61 million shares
changed hands.
In a note today, Credit Suisse analyst Annuar Aziz said that MAHB’s
traffic outlook remains strong “with the start-up of Malindo Airways and
AIRASIA BHD []’s accelerated aircraft roll-out programme”.
“In the longer term, MAS membership of ‘oneworld’ alliance could see
the return of carriers such as British Airways, which have been absent
for over a decade. Pending greater clarification on management on the
timing and cost of KLIA2, we are maintaining our earnings forecast and
the ‘outperform’ rating on the stock,” he elaborated in the note.
On the potential delay of KLIA2 airport opening, Annuar said a short
delay – which he said is in the period of three to six months – would not
have a significant impact on MAHB’s earnings, as it would delay the
recognition of depreciation and interest charges.
“However, we are more concerned of potential cost over-runs above its
estimated RM4 billion budget. (MAHB’s) management has reiterated
that the CONSTRUCTION [] contracts awarded are on a ‘buildand-
design’ basis, thus cost overruns and variation orders due to
changes in the design will have to be borne by the contractor.”
Annuar noted that KLIA2’s contracts may have an upper hand when negotiating with MAHB for a potential cost past through,
should the terminal be opened on time.
“We estimate that if MAHB is forced to bear the cost of the variation orders, each RM100 million would cost MAHB RM9
million in higher finance and depreciation charges,” he opined.
KLIA2 was previously reported to open on June 28, Annuar stated in the note. He also mentioned that the airport has been
82% completed.
“Previously management had indicated that contractors will embark on a ‘catch-up’ programme that should see the terminal
completed and operational by June 28. However, as reflected in the 41% quarter-on-quarter fall in construction revenue for
KLIA2 booked in 1Q13, it would appear that the ‘catch-up’ programme did not materialise.”