KUALA LUMPUR (Jan 2): TA Securities has increased its target price for Malaysia Airports Holdings Bhd (MAHB) to RM8.20 from RM7.85, while maintaining the counter as one of its top picks for 2024.
In a note on Tuesday, the research house said it had revised the stock after reducing its capital asset pricing model to 14.4% from 14.9% through updating the stock beta.
Meanwhile, TA Securities said MAHB is one of its top stock picks for the year because it believes that the airport operator will benefit from increased travel demand to China and Malaysia, thanks to visa-free entry effective from Dec 1, 2023.
"In addition, we believe airline companies would continue adding capacity to the market, thereby reducing the airfare further, which would bode well for MAHB," it said.
Passenger movements continued to grow in November
TA Securities said that for November 2023, MAHB reported 6.6 million passenger movements, down 2.9% month-on-month (m-o-m) but up 27.4% year-on-year (y-o-y).
"This would likely be the second lowest pax volume in 2023, as November is usually the off-peak travelling season. Having said that, the growth in international traffic remained robust (up 0.4% m-o-m; up 51.8% y-o-y) in November 2023, offsetting the seasonal weakness in domestic traffic (down 6.3% m-o-m; up 8.8% y-o-y)," it said.
The contraction in domestic traffic was due to higher seat allocations to international flights, with higher fares and offering airline companies better yields.
"According to the management, the average load factor for the domestic sector in November recorded above 80% for the second consecutive month, with the airline's seat capacity offered at 66% of pre-pandemic levels," it said.
According to the research house, the growth in cumulative passenger movements in Malaysia in the first 11 months of 2023 moderated to 61.2%, from 65.6% a month ago, to 74.1 million.
This accounted for 89.1% of TA Securities' full-year forecast of 90 million, which was due to lower-than-expected flight capacity for 2023.
Meanwhile, passenger movements at the Istanbul Sabiha Gökçen International Airport (ISG) shrank by 10.4% m-o-m, though it rose by 12.4% y-o-y.
"This was underpinned by weaker international (down 12.5% m-o-m) and domestic traffic (down 8.1% m-o-m) seasonally during the winter.
"Cumulatively, the ISG's total passenger movements grew 21% to 34.4 million in the cumulative 11 months of 2023, on the back of decent growth in both international (25.7%) and domestic (16.2%) traffic."
MAHB continues to be top pick for 2024
The research house noted that MAHB had rallied by 12.8% in 2023, meeting its stock selection goal as one of its top picks for the year.
"Throughout 2023, [the Employees Provident Fund] reduced its stake to 6% at end-December from 15.7% in early 2023, while [Retirement Fund Inc] raised its stake marginally to 7.2% at end-December from 6.3% early [in 2023]. In terms of foreign shareholdings, the group's total foreign shareholding increased from 21% in January to 26.4% as at September 2023," it said.
TA Securities did not change its earnings forecasts for FY2023, FY2024, and FY2025, with core net profit of RM496.8 million, RM728.4 million, and RM695.4 million, underpinned by revenue of RM4.48 billion, RM5.66 billion, and RM5.87 billion.
At the time of writing on Tuesday, MAHB was up three sen or 0.41% to RM7.39 a share, giving the group a market capitalisation of RM12.33 billion.