Raring to go
U/G to BUY and lift DCF-based TP to MYR7.00 (+15%)
Results were better than we expected. This year ought to be better as Malaysia will welcome international passengers soon. We narrow our FY22E loss by 10%, raise our FY23E earnings by 18% and introduce FY24E estimates. Rolling forward our valuation base year to end-FY22E from endFY21E, we raise our DCF-based TP to MYR7.00 from MYR6.10. With >10% upside potential, we upgrade MAHB to BUY. Catalysts are opening of Malaysia’s borders and new Operating Agreement.
FY21 core net loss narrower than expected
4Q21 core net loss of MYR151.2m (-49% YoY, -23% QoQ) brought FY21 core net loss to MYR823.9m (+6% YoY) which was narrower than what we expected at 82% of our FY estimate. The outperformance was due to:- FY21 Malaysian domestic passengers (pax) traffic coming in 4.1m above our expectations, accreting c.MYR40m; and (ii) FY21 staff, utilities, communications and maintenance costs (core costs) coming in MYR85m less than we expected.
FY22E ought to be a lot better, in our view
Despite the recent Omicron wave, the Malaysian government will reopen its borders soon thanks to its high vaccination rate. This is important to MAHB as international PSC is 5 to 7 times that of domestic PSC. Yet, the recovery in international pax traffic will likely be gradual due to the high cost of PCR testing pre- and post-travel. Also, we are unsure if it will recover to 100% of pre-COVID-19 levels as AirAsia X (AAX MK, CP: MYR0.59, Not Rated) and Malindo Air (Not Listed) have cut capacity.
Trim FY22E loss by 10% and lift FY23E profit by 18%
We maintain our revenue estimates which are based on:- (i) Malaysian pax traffic recovering to 100% for domestic and 80% for international relative to pre-COVID-19 levels by FY23E; and (ii) Turkish pax traffic recovering to 102% for domestic and 100% for international relative to pre-COVID-19 levels by FY23E. That said, we cut core costs by c.MYR90m p.a. for FY22E and FY23E. This narrows our FY22E loss by 10% and raises our FY23E earnings by 18%. We also introduce FY24E estimates.