By Maybank IB Research
29th Jan 2013
Buy (unchanged)
Share price: MYR5.50
Target price: MYR6.60 (from MYR6.90)
Maintain Buy with a lower target price. We look forward to a promising 2013 with robust traffic growth thanks to sustained economic growth and high capacity deployment plans by the domestic airlines. We are also excited with the opening of KLIA2 (officially 28 June) as it opens platforms for many new revenue streams. Maintain BUY, with a lower DCF-based target price ofMYR6.60/share (from MYR6.90) after adjusting for higher number of shares and other cost items.
Disappointing 2012. There was a surfeit of accounting adjustments and rise in cost items that had weighed down on 2012’s performance. This had masked the increase in passenger service charges (PSC) and
landing charges imposed in Nov 2011 which greatly aids to boost revenues.The underlying business remains healthy and churns strong cashflow, as demonstrated by the 39% YoY growth in 9M12’s OCF. There will be a provision of MYR63m for Male airport discontinuation.
2013 looks exciting. Traffic growth is expected to accelerate to 10% in 2013, higher than 2012’s est 4.7% growth. Sustained economic growth, record number of firm aircraft deployment and Malaysian Airlines reigniting its capacity growth are the main drivers. Furthermore, the rise of the third force, Malindo Airways, is expected to spark a price war among the airlines and help churn strong traffic growth.
KLIA2’sofficial launch on 28 June.The Prime Minister has requested for the KLIA2 to be launched on 28 June 2013 – the same opening date for KLIA launch 15 years ago. However, the internal target for handover from contractors to MAHB remains on 30 April. The opening of KLIA2 was originally targeted for May. An official launch on 28 June, if it is without a soft launch in May, would mean a two month delay – this will reduce 2013 revenues and additional costs.
Lowering earnings forecasts. We have lowered our FY13-14 forecasts by 12.9% and 11.6% respectively to take into account an enlarged share capital base due to the dividend reinvestment program,
new KLIA2 start date and other cost adjustments. This has reduced our DCF valuation, of which our TP has also been adjusted accordingly.
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