MAHB announced it did not receive Certificate of Completion and Compliance (CCC) which was due on 31 Jan 2014.

Delay to KLIA2’s 2 nd  May launch looks imminent, given that the operational readiness and airport transfer (ORAT) normally takes 3-6 months post the CCC to complete.

Downgrade to SELL with a lower target price, valuation methodology changed to PER (from DCF) bringing near-term valuations more in line with peers.

What’s New

MAHB announced that the main contractor for KLIA2, UEMC-Bina Puri JV failed to provide the CCC by the stipulated deadline of 31 Jan 2014. This is a big disappointment, given that management briefed that everything was on track during the 4Q13 analyst briefing held on 27 Jan 2014 ─ just one week ago.

What’s Our View

Management have reiterated that all efforts are being taken to support the launch date of 2nd  May 2014. However, we understand that without the CCC, KLIA2 is unable to initiate the ORAT process. ORAT is an exhaustive and meticulous process, and comparable projects of this scale have typically consumed 3-6 months, never less than 3 months. Based on this, we think delay to the planned launch date looks imminent.

Investors will be lethargic with this on-going uncertainty and likely trade down or switch to other listed airport alternatives. We change our valuation methodology to PER as we think investors will focus on the short-term outlook of the Company until the KLIA2 issue is resolved once and for all. We downgrade MAHB to a SELL (from HOLD), with a lower target price of MYR7.03 (from MYR8.10) based on 2014 PER of 20.5x ― in line with global peers.

Source: Maybank Research - 5 Feb 2014