Another core net loss expected for MAHB, analyst

PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) is expected to continue registering a core net loss in the second quarter ended June 30, 2015 (2Q15) on the back of flat passenger movement growth in the first half of the year (1H15), said Affin Hwang Capital.
"MAHB is due to release its 2Q15 quarterly financial results on July 30, 2015. We expect MAHB to remain in the red, on the back of softer passenger movement growth as well as high operating cost from klia2 and Istanbul's Sabiha Gokcen Airport (ISGA) due to a longer gestation period," it said in its research note last Friday.
Passenger traffic handled by MAHB in 1H15 was flat, with Kuala Lumpur International Airport (KLIA) registering an 8% year-on-year contraction in passenger traffic. However, this was mitigated by a 5.2% growth in passenger traffic in klia2 and other MAHB domestic airports.
The drop in KLIA traffic was mainly due to the impact from Malaysia Airlines' (MAS) restructuring exercise, which include many route cuts, as well as Malindo Air's move to klia2. This resulted in a 5.2% growth in passenger movement at klia2.
"At flat growth in 1H15, the number of passenger movement came in below our expectation of a more aggressive 10% growth forecast. Despite 2H being seasonally stronger, due to the current softening global economic environment, MAS' restructuring exercise and further cutting of routes as well as AirAsia X's deferment of expansion, we do not anticipate an aggressive growth in passenger traffic in 2H15.
"Since December 2014, tourist arrivals have been on the downtrend. In March, the number of tourist arrivals fell by 11% year-on-year, marking its fourth month in a row of contraction," said Affin Hwang.
The research house revised its projection on passenger movement growth for 2015 to 5% (equivalent to 87 million passengers) from 10% previously.
It said that the weakening ringgit would be a potential driver for tourism, which may cushion part of the negative factors. It also noted that travel demand in the second half of the year is seasonally stronger due to various festivals and summer holidays.
Meanwhile, aircraft movement remain relatively robust at 6.3% growth in 1H15, which is within Affin Hwang's expectation of 7% growth in 2015.
Aircraft movement in KLIA grew by 5.4% driven by international flights, which grew 6.9% year-on-year. Domestically, aircraft movement grew by 2.6% year-on-year.
Affin Hwang lowered its 2015E forecast to a loss (core net loss of RM15.8 million) after imputing higher depreciation charges (impact from klia2), higher interest expense (impact from Sabiha Gokcen International Airport Ltd), softer passenger movement of 5% from 10% previously and updated 2014 audited figures.
It reiterated its "sell" recommendation and lowered its target price to RM5.40 from RM5.90 previously.