Malaysia Airports : Turkey attempted coup to affect traffic growth HOLD

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Malaysia Airports : Turkey attempted coup to affect traffic growth           HOLD

We maintain HOLD on MAHB, with an unchanged fair value of RM6.10/share, based on a 25% discount to our SOP value of RM8.14/share. The situation in Turkey is normalising although the situation is still fluid after a failed military coup in the country, Wisma Putra has reported. According to the foreign ministry, all airports in Turkey have also resumed its operations. Regardless, the continuing uncertainty in Turkey is a negative for Malaysia Airports Holdings' operations in Turkey, though the exact longer term impact is still unclear. Prior to this, MAHB had said the travel warnings to Turkey and visa requirements may restrict ISG's growth to over 10% as experienced previously. ISG passenger traffic grew 19.6% YoY to 6.7mil in 1Q16. ISG's traffic had already been affected by the bombing at neighbouring Ataturk Airport at the end of last month, visa restrictions as well as fewer travels during Ramadan. In 1Q16, MAHB's Turkey operations incurred a loss after tax of RM69.3mil (-8.1% YoY) due to high finance costs and depreciation, while Malaysia operations posted a PAT of RM85.8mil (-10.7% YoY).

The 1Q16 EBITDA of RM452.6mil, including ISG & LGM's at RM168.4mil, was in line with and represents 26% of the group’s RM1.7bil internal target, and also in line with our estimate at 27%. For FY15, the Turkey operations suffered a pre-tax loss of RM172mil mainly due to the amortisation of fair value of concession rights (20 years).  MAHB's operations in Turkey comprise its 100% interests in the Istanbul Gokcen International Airport (ISG) and LGM Havalimani (LGM), which manages and operate the airport. The group's passenger movements at its airports, including ISG, fell 4.2% to 9.05mil in June 2016, compared with 9.45mil a year earlier. Excluding ISG, passenger movements for June was 4.9% lower. The group recorded a 4.2% growth in 1H16. MAHB has maintained its passenger traffic growth for Malaysia airports at 2.5% for 2016.

Others :

TSH Resources : Output to be weak in 2QFY16    HOLD

Oil & Gas Sector : Pan-Malaysia T&I umbrella up for bid again      NEUTRAL

Automobile Sector : More details on the Perodua Bezza                NEUTRAL

QUICK TAKE

Plantation Sector : Newsflow for week of 11 to 15 July   NEUTRAL

ECONOMIC HIGHLIGHTS

China : Can private investment turnaround in 2H2016?

NEWS HIGHLIGHTS

CIMB Group Holdings : Cuts interest rate by 20bps

Utility Sector : Ranhill to tap more NRW revenue

Consumer Sector : Aeon to use mall capex for refurbishing

Property Sector : Ireka plans six projects worth RM1.3bil