Hot Stock MAHB falls 2.3% on downgrades, MAS weakness

by **Cals** Wed 21 May 2014, 01:39

Hot Stock MAHB falls 2.3% on downgrades, MAS weakness

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Tuesday, 20 May 2014 12:44

KUALA LUMPUR (May 20): Malaysia Airports Holdings Bhd (MAHB) fell among top decliners on analyst downgrades amid weakness seen in Malaysian Airline System Bhd (MAS).

At 11:45am, MAHB fell 18 sen or 2.3% to RM7.52 with 1.4 million shares traded. The stock settled at RM7.42 at 12.30pm.

CIMB Investment Bank downgraded MAHB shares to “hold” from "add", and cut its target price (TP) for the stock to RM7.73 from RM9.35.

CIMB analyst Gan Jian Bo said he believed MAS' load factor would fall, given imperative of raising ticket prices.

“We also believe that MAS’ load factor will fall, given the imperative of raising ticket prices, so the fall in the number of passengers will be greater than the fall in the number of flights.

“Under the base-case scenario, we expect MAHB’s core earnings per share to fall 11% in FY15 and 9% in FY16, and our target to fall to RM7.73,” Gan said.

Meanwhile, Hong Leong Investment Bank (HLIB) retained its “buy” rating on MAHB shares with an unchanged TP of RM10.55.

HLIB analyst Daniel Wong said it was likely that MAS' bankruptcy risk would involve renegotiation, restructuring and capacity cuts.

“If we assumes MAS cuts capacity by 30% (mostly international flights due to the larger losses contribution vs. domestic flights), there will be 11% impact to passenger movement of MAHB,” he said.

Wong said he was not overly concerned about this impact as he believed demand for travel would still grow.

“We are not overly concern on the impact of MAS to MAHB. We believe the demand for travelling will still grow despite MAS cutting capacity, as other airlines will take opportunity to increase capacity to take over the vacuum left by MAS," he said.