THE BUZZ
Malaysia Airports announced that it has decided to defer the opening of KLIA2 to 28 June 2013 from the originally targeted 1 May 2013 on the advice of Prime Minister Datuk Seri Najib Razak. This is to ensure that any teething problems that may arise are resolved before the new airport’s opening, although it is still on track to take off as planned.
OUR TAKE
Within our assumptions. While we had earlier expected works on KLIA2 to be on schedule for the new airport to commence operation by May this year, we had also assumed a buffer period before KLIA2’s contribution effectively flows in by 2H2013. We are positive on this announcement as delaying its opening will ensure that the new airport begins operation without any glitches.
KLIA2 to earn more revenue as LCCT capacity under strain. With KLIA2 only commencing operations on 28 June, this would mean that MAHB may be earning higher aeronautical revenue from the low cost carriers operating at KLIA given the limited slots currently available at the existing LCCT. Lion Air, which is expected to commence operation in March, is likely to kick off from KLIA in the meantime.
Maintain BUY. Our DCF-derived FV is RM8.00, assuming WACC of 9.1%. We maintain our BUY call on MAHB as the airport operator continues to be buoyed by resilient demand for air travel as well as its cash generating business. Meanwhile, any pullback in its share price in response to the delay in KLIA2’s commencement date should open up opportunities for investors to accumulate this under-appreciated stock. Compared with Airports of Thailand (BUY, FV THB104), MAHB is trading at a 20%-30% discount to its FY13 and FY14 PEs.
Malaysia Airports announced that it has decided to defer the opening of KLIA2 to 28 June 2013 from the originally targeted 1 May 2013 on the advice of Prime Minister Datuk Seri Najib Razak. This is to ensure that any teething problems that may arise are resolved before the new airport’s opening, although it is still on track to take off as planned.
OUR TAKE
Within our assumptions. While we had earlier expected works on KLIA2 to be on schedule for the new airport to commence operation by May this year, we had also assumed a buffer period before KLIA2’s contribution effectively flows in by 2H2013. We are positive on this announcement as delaying its opening will ensure that the new airport begins operation without any glitches.
KLIA2 to earn more revenue as LCCT capacity under strain. With KLIA2 only commencing operations on 28 June, this would mean that MAHB may be earning higher aeronautical revenue from the low cost carriers operating at KLIA given the limited slots currently available at the existing LCCT. Lion Air, which is expected to commence operation in March, is likely to kick off from KLIA in the meantime.
Maintain BUY. Our DCF-derived FV is RM8.00, assuming WACC of 9.1%. We maintain our BUY call on MAHB as the airport operator continues to be buoyed by resilient demand for air travel as well as its cash generating business. Meanwhile, any pullback in its share price in response to the delay in KLIA2’s commencement date should open up opportunities for investors to accumulate this under-appreciated stock. Compared with Airports of Thailand (BUY, FV THB104), MAHB is trading at a 20%-30% discount to its FY13 and FY14 PEs.
Source: OSK
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