AIRPORT's 9MFY24 results met expectations. Its 9MFY24 core net profit doubled buoyed by high-yielding international passenger throughput. For AIRPORT, the poser is if the proposed privatisation by a consortium at RM11.00/share will be accepted by its minority shareholders. We maintain our earnings forecasts, TP of RM11.00 and ACCEPT OFFER call.

AIRPORT's 9MFY24 core net profit met expectations at 75% each of our and consensus full-year net profit forecasts.

Note that the offer document is expected to be despatched to the shareholders somewhere in early Dec CY24.

YoY, its 9MFY24 revenue rose 20% in tandem with a 14% increase in passenger throughput to 101m (>90% of pre-COVID volume) which drove higher aeronautical (+22%) and non-aeronautical (+19%) segments. The better performance from non-aeronautical segment was due to higher retail revenue, attributed to an increase in passenger throughput. Its 9MFY24 core net profit doubled, buoyed by high-yielding international passenger throughput and lower operating cost.

QoQ, its 3QFY24 revenue rose 11% due to higher aeronautical segment thanks to higher passenger movement in Malaysia and Türkiye. However, its core net profit rose by 2% due to a higher effective tax rate and absence of recognition of deferred tax assets in 2QFY24.

The group reiterated that passenger's throughput recovery is gaining traction in both Malaysia and Türkiye. It anticipates further growth, with passenger traffic expected to approach pre-pandemic levels, particularly from key markets such as China, India, and Southeast Asia. AIRPORT's 9MCY24 system-wide passenger throughput (including Istanbul SGIA) came in within our expectation.

Total network of airports' passenger traffic continued to gain traction in 9MCY24, recording 101m (+14% YoY) which made up 76% of our full-year forecast. As an indication that traffic recovery has continued to show buoyancy, 9MCY24 passenger movements reached >90% of CY19 level, underscoring the underlying demand for air travel. Specifically, international passenger throughput of 53m for 9MCY24 grew 25% partly driven by visa exemptions for Chinese and Indian travellers, the expansion of the airlines network directed towards the international sector and introduction of new routes.

The commencement of new airlines, including Air India to Delhi, once weekly frequency of 9 Air to Guiyang and Lucky Air with weekly frequencies to Lijiang City, partly contributed to international passenger movement growth for China and India. The international passenger movements were also supported by AirAsia's new operations from KLIA to Labuan Bajo and Lucknow while Malaysia Airlines has commenced daily flights to Da Nang.

Domestic passenger throughput continued to record a steady growth, reaching >90% of 9MCY19 level with 48m passengers (+4% YoY).

Its Malaysia operation's total passenger movements for 9MCY24 grew by 15% and reaching >90% of 9MCY19 levels, boosted by international passengers recording 36m (+32%). There has been a notable increase in passengers from Mainland China following the 30-day visa-free entry extension until December 2025, and for the first time with 457 weekly flight frequencies to China, which exceeded 3QFY19 by 24.8%. The India sector also demonstrated a 90% recovery over 2019 levels, indicating growing latent travel demand from India. Similarly, in Türkiye, passenger movements for Istanbul SGIA continued to show resilience in 9MCY24, recording 31m passengers reflecting a 12% increase YoY.

Valuations. Our TP is the offer price of RM11.00 and our call is ACCEPT OFFER.

Risks to our call: The consortium fails to secure a 90% stake to make the privatisation mandatory.

Source: Kenanga Research - 27 Nov 2024