Stock Focus MAHB still a “buy” despite possible delay in klia2 launch

Stock Focus MAHB still a “buy” despite possible delay in klia2 launch
Business & Markets 2014
Written by Jeffrey Tan of theedgemalaysia.com
Wednesday, 05 February 2014 15:53

KUALA LUMPUR (Feb 5): Although many analysts see a delay in the opening of the RM4 billion low-cost airport terminal klia2, they have not downgraded Malaysia Airports Holdings Bhd (MAHB).

Yesterday, MAHB – the country’s airports operator -- announced it had yet to receive the Certificate of Completion and Compliance for the klia2 terminal building.

But it also said it would engage with its main contractors to ensure the targeted May 2 opening of klia2 could be met.

The contractors, UEMC-Bina Puri JV, a joint venture of UEM Group and Bina Puri Holdings Bhd, had blamed the delay on ‘an unexpected issue which occurred recently during a follow-up inspection’.

Despite the potential delay, Alliance’s research analyst Tan Kee Hoong said: “We do not expect significant downside to our discounted cash flow valuation, if the opening of klia2 is delayed by less than six months.”

“In this case, earnings cut will only be restricted to FY14.”

Tan said he maintains ‘buy’ for the stock, with target price of RM10.45.

At midday break, MAHB rose 6 sen or 0.7% to RM8.21. The stock, which was sold-down along with other blue chips yesterday due to global jitters, saw some 200,000 shares traded.

MAHB rebounded by as much as 1.3% today after yesterday’s sharp fall of more than 3%.

Tan said passenger traffic should remain robust, as congestion at current low cost terminal LCCT would not deter holidaymakers from travelling.

He added MAHB could extract higher passenger service charges from Malindo that would remain at the main terminal building.

However, RHB Investment Bank Bhd said it saw swift efforts to meet the slated May 2 opening and thus would maintain ‘buy’ for the stock with a fair value of RM9.80.

“As at Jan 7 this year, klia2 was 98% completed. Hence, we think that any setback on full completion will likely be minor as it will require minimal time,” said RHB IB’s analyst Ahmad Maghfur Usman.

Ahmad said upside catalysts to earnings would be a higher-than-expected hike in airport tax, which the government would announce on Feb 12.

“We continue to like the klia2 theme, banking on the revenue growth of its enlarged retail space outlet,” he said.

Malaysia Airports (MAHB) initially planned a September 2011 opening for its Kuala Lumpur International Airport 2 (klia2), to add to its current terminal for low-priced travel which operates far beyond its 15 million passenger capacity, according to Reuters.

The project suffered a series of delays caused by, for instance, a dispute over facilities with AirAsia Bhd, Asia's biggest budget carrier, and the decision to raise the terminal capacity to 45 million passengers from 30 million passengers.

Last July, the government set an opening date of May 2, 2014, and established a committee to monitor the project where costs have nearly doubled to RM3.9 billion from an initial estimate of RM2 billion.