Translate This Page

Malaysia Bank Swift Code

What is Swift code? Swift code is known as ISO 9362 and is a standard format of Bank Identifier Codes approved by the International Organiza...

Tuesday, September 27, 2016

Brokers Report: Aviation sector - New PSC Rates

Maintain overweight on aviation sector

Aviation industry
Last week, it was reported that the Transport Minister has confirmed the upward revision for PSCs, which will be implemented for all airports in Malaysia starting 1st January 2017. 

While rates are not firmed up yet, tentative new rates suggest all airports will have the same structure with International and Domestic PSCs at RM73 and RM11 in addition to a new segment known as ASEAN routes at RM35. We are positive on the tentative rates, as they indicate 10% higher PSC revenue for AIRPORT translating to a potential 25% upgrade to our FY17E earnings. While the magnitude of hike might appear huge for AIRASIA operating in KLIA2, we note that the effective impact would be minimal as most of AIRASIA’s international flights are flown towards ASEAN countries, which will fall under the new RM35 ASEAN segment – allowing them to keep their competitive pricings. We upgrade AIRPORT’s FY17E earnings by 25% on the back of a 10% increase in Malaysia PSC revenue post adjustment to new rates while keeping AIRASIA’s earnings unchanged. 

Post adjustment for AIRPORT, we upgrade its call to OUTPERFORM (from MP) with higher TP to RM7.33 (from RM6.43) based on higher FY17 PBV of 1.58x (+0.5SD 5 year historical) from 1.39x (-0.5SD). Meanwhile maintain OP call and TP of RM3.82 for AIRASIA. Hence, maintain OVERWEIGHT on the sector.

New PSC rates. 

Last week, it was reported that new rates for PSC will be implemented at all airports in Malaysia in a move to level the playing field starting 1st January 2017. While rates are not firmed up yet, tentative new rates reported by ‘The Sun’ suggested that the new PSC charges will be RM11 for domestic flights, up from RM9 for KLIA Main and RM6 for KLIA2; RM73 for international flights, up from RM65 out from KLIA Main and RM32 from KLIA2 and an addition of a new segment – inter-ASEAN flights which will be priced at RM35. (refer back for Table)

Positive on the suggested new rates. 

Currently, besides PSC revenue generated from departing passengers, AIRPORT enjoys additional revenue on top of existing PSC only if the current PSC is lower than the benchmark rates stipulated in the Operating Agreement 2009 (currently 2nd tariff cycle). This additional revenue - more commonly known as MARCS PSC is a subsidy by the government and the amount subsidized is the difference between the benchmark rates and PSC. We are positively surprised by the suggested new PSC rates as this would indicate c.10% higher PSC revenue for AIRPORT’s Malaysian operations on the followings: (i) most of the new rates are higher than existing benchmark rates, and (ii) despite new ASEAN routes indicating lower PSC of RM35 instead of previous RM65 in KLIA Main along with the other four international airports, AIRPORT will be subsidized by MARCS PSC for the difference in current benchmark rate of RM71.

Impact towards AIRASIA in KLIA2. 

While the magnitude of hike (international: +128%; domestic: +12%) for airlines operating in KLIA2 namely AIRASIA seems huge, we note that the impact will be minimal as (i) most of AIRASIA’s international flights are flown towards the ASEAN region which will fall under the new RM35 ASEAN segment – allowing AIRASIA to keep their competitive pricings. While it is possible that there could be a shift in passengers away from AIRASIA towards other airlines due to the more ‘level playing field’, we opine that AIRASIA has high chances of holding up their passenger numbers citing Malindo Airlines and Tiger Airways’ shift in operations from KLIA2 towards KLIA Main in 15th March 2016. Despite these two operating in the higher PSC KLIA Main, their shifts in operations are evident through improving KLIA Main traffic numbers from April to August showing increasing monthly YoY improvements (+2% to +26%) against negative YoY performance in January-March (- 9% to -13%).

Earnings upgrade for AIRPORT. 

We upgrade AIRPORT’s FY17 earnings estimates by 25% to RM111.3m on the back of a 10% increase in Malaysia’s PSC revenue based on the new PSC rates suggested. That said, we assumed an unchanged passenger growth assumption of 3% (Malaysian operations) for FY17 as we believe the rate hikes will not deter travellers from travelling as the impact towards air ticket prices are minimal. Meanwhile, we keep AIRASIA’s earnings estimates, call and TP (OP; TP: RM3.82) unchanged as well.

Maintain OVERWEIGHT on Aviation Sector. 

Post upgrade in AIRPORT earnings, we revise our valuations upwards for AIRPORT from FY17 PBV of 1.39x (-0.5SD) to +0.5SD 5-year historical Fwd. PBV of 1.58x. We believe AIRPORT warrants the upgrade premised on the much-improved PSC structure providing better earnings outlook post equalisation of PSC charges for KLIA Main and KLIA 2. Hence, we upgrade AIRPORT to OUTPERFORM (from MP) with higher TP of RM7.33 (from RM6.43) post adjustment. We believe further upside on AIRPORT lies with a faster-than-expected recovery for their ISG operations as the negative news fade away. Meanwhile, we reiterate AIRASIA’s OUTPERFORM call with an unchanged TP of RM3.82. Hence, we maintain OVERWEIGHT on the Aviation Sector.

Source: Kenanga Research - 26 September 2016

No comments:

Post a Comment

Labels

Investment News share market bursa malaysia FBM KLCI market daily report stock stock market Brokers Report Malaysia Financial Management brokers call Personal Finance research report Financial Economy General stock investment Money Articles FBMKLCI Stocks market PublicInvest Research Budget Wall Street Update PublicInvest research report Wall Street KLCI oil & gas 1MDB Hong Leong Investment Bank research report Personal Opinion Dow Jones Issue US bursa Credit Card Debt Kenanga research report equity market kenanga research oil price politics ringgit Market Watch PPP klse najib property development Malaysia Weekly Highlights Nasdaq oil property thoughts EPF Hong Leong Investment Bank Research Income Tax construction Maybank Research Misc Money Master Najib Razak S&P 500 Index The Edge Financial Daily US stock market bank negara weekly weekly investment term China Companies in Focus Inflation Loan Rules Theedgemarkets business maybank plantation s&P 500 warren buffett Crude Oil Insurance MIDF research report Maybank IB research Retirement Planning Reuters business news finance global opinion spending stocks with momentum technology Bank Brokers Feng Shui OPEC Savings Wealth bear market currency financial services global market investing microsoft wallstreet 1 Malaysia Development Bhd 1Malaysia Development Bhd BNM International Reserves Billionaire Budget 2016 Commodity Disney Investment Term Malaysia News PCB Petronas Richest People STD Saudi Arabia bloomberg british american tobacco gaming sector low oil price media publicInvest russia share investment stock pick telecommunication top glove trading wallstreet update weakened Ringgit 2010 2016 Air Asia America Bad Debt Bill Gates Billy Toh Budget 2017 Calculation Chinese New Year Currency Exchange Education Fed Forex Gold IPIC Income Iran Kenanga Research research report Lembaga Tabung Haji MAS Macquarie research report Oil & Gas sector Quote RHB Semiconductor Industry Association (SIA) Star Wars Star Wars: The Force Awakens US Fed hike affin hwang capital airasia analyst apple axiata bearish market business highlights construction & engineering consumer products dow jones industrial average earnings report equity expenses global bear market healthcare hup seng industries berhad inari inari amertron berhad interest rate learning malaysia airlines market news maybank investment bank oil and gas oil palm plantation oil prices opr overnight policy rate (OPR) s&P500 s&p satya nadella scandal thought thought of the day 2013 2014 Bank Negara reserves Broker Report Budget 2020 Cash Rebate Donald Trump Earn Financial Planning Financial World Forbes Global Competitiveness Report Global News Global semiconductor sales Goldman Sachs Good Debt How The Rich Get Richer IOI Corp Bhd India Intelligent Investor Interest Rates Linear Income M&A Securities Mahathir Malaysia Business Highlights Maybank 2 card P1 Passive Income Privacy Policy PublicInvest Bank research report REIT RHB Investment Research RHB Research Report RM SIA Sector review TA Research TM TPPA Telekom Malaysia Tun Dr Mahathir US news USD USD against MYR United States Wall Street Journal World Economic Forum Zeti airasia x airlines apple inc asset allocation automotive aviation sector azure banking sector bat beverage bonds box office brent crude budget 2015 bumi armada buy property cash consumer discretionary default developer electricity tariff hike engineering financial market global economy greece gst home hong leong investment bank house infrastructure iphone jobs kossan rubber industries macquarie equities research report malaysia Ringgit market close market updates mukhriz nadella new era for oil opinions pipeline services politic public bank random rate hike research retirement ringgit crisis sector update semiconductor semiconductor sales semiconductor sector shale producers share sime darby stock market. oil & gas industry tax technical analysis telco sector the edge weekly news world market 0% Easy Payment Plan 1MDB scandal 1mdb story 20 cents 2009 2011 29 minutes 3.25% 53 cost cutting measures 7-eleven 9 Things Rich People Do Differently Every Day ABNxcess AFP NEWS AMMB Abu Dhabi fund AirAsia X Bhd Alcohol AmInvestment Bank research report Amazon Ambank Aminvestment research report Ann Joo Ann Joo Resources Bhd Anwar Apple watch Asia Asian stock market Avengers BIMB Securities Research BJ Auto BP Plastics Holding Bhd BSI Singapore Bailout Banking and finance sector Benjamin Graham Biden Bio Osmo Book Borneo Oil Bhd CIMB CLIQ Energy Bhd CPO export tax CPO price CSI 300 Carlos Slim Carlsberg Cepatwawasan Group Bhd Charts China General Nuclear Power Corp China's bond market China's wealthiest man Christmas Circuit breaker Citibank Cash Back card Commodity Watch Credit Customer Service DSKH Holdings (M) Bhd Dagang NeXchange Bhd Datasonic Group Bhd David cameron Debt Status Deficit Deloitte Dividend Domestic news Dutch Lady Milk Industries Bhd E.U ECB EON Eastern & Oriental Bhd Eco World Eco World Development Group Bhd Edra Euro Europe Central Bank European Union Evergreen External Trade FPSO Genesis Fed rate hike Federal Reserves Federal rate Fitbit Fitbit Inc Gamuda Genting Malaysia Berhad George Kent (M) Bhd Global Competitiveness Index Global Issue Gordon Growth Greece exit Greed is Good Guan Chong Bhd Guinness HSBC Hasbro Hektar Reit Hiap Teck Ventures Bhd Highlights Hillary Clinton Hock Seng Lee Hong Leong Bank Bhd Hong Leong Bank Investment research report Hong Leong Bank Wise card Hong Leong Industries Bhd ICB IMF INTC IPO IPOs IT Ibraco Bhd Intel Corporation International Petroleum Investment Company (IPIC) Islamic Banking and finance sector Ismail Sabri JF Apex Securities JF Apex Securities Research Janet Yellen Jerasia Capital Bhd Junk KNM KNM Group Bhd KVMRT 2 Investment KWSP Keep Up With The Joneses Khir Toyo LHDN Leissner Lim Kit Siang Lucasfilm M+ online Market Wrap MARA MH370 MIDA MISC Bhd MLTA MPC MRTA MSN Money News Madza Malaysia Airports Holdings Malaysia Banking Malaysia Bond Market Malaysia fund Malaysian Palm Oil Board Malaysian Ringgit Mara Digital Store March CPO export tax Maxis Maybankard 2 Card Microsoft in the new era Millionaire Next Door Mistakes Motivation N2N Connect NAP 2014 NTPM Holdings Bhd Nazir Razak News Update News at a Glance Nikkei O&G OCBC OPEC war OSA Obama Office 365 Windows 10 Oil Watch PTPTN Packet One Parkson Paypal Perdana Perisai Petronas Chemicals Group Bhd Petronas Gas Bhd Pintaras Jaya Bhd Pioneer Natural Resources Co Power Practical ways on spending Prestariang Bhd Public Investment Research PublicInvestresearch report RBC Capital Markets RCP average poll of US election RGB International Bhd RHB Research RM crisis RM2.6 billion ROE Ranhill Holdings Bhd Rants Rating Raya holiday Recession Ringgit's volatility SEM SKB Shutters Corp Bhd SME segment SP Setia SRR Saizen REIT SapuraKencana Seacera Group Bhd Shale oil Sime Darby Bhd Simee Darby Singles Stimulus Plan Stock Selection for the Enterprising Investor Sunway Construction Bhd Superlon Holdings Bhd Swift Code TIME TMI TNB TOYOTA TRC Synergy Tan Sri Tony Fernandes Tax Reliefs Technorati Tenaga Tenaga Nasional Bhd The Citizens Declaration The Edge Weekly The Negative Side The New York Times Tim Cook Titijaya Land Bhd Trans-Pacific Partnership Agreement Trump v Clinton Tsipras U.K UEM Edgenta Bhd UMNO UMW Oil & Gas UOA US Box Office US election US fed US manufacturing data US market US patent and trademark US prosecutors US stocks USA USD/MYR USEconomy Uchi Technologies Bhd Ultra-Rich Networth individuals UniFi United Kingdom Uob one card Versatile Creative Bhd W-8BEN WCT Holdings Wahid Wal-Mart Wall Street support Warren's Way Windows 10 Yak Yew Chee Yellen Yinson Holding abenomics aemulus affordable housing ahmad bashah ahmad zahid airline airports alibaba alternative investment aluminium asian market audit automobile azure machine learning bank negara malaysia below $30 a barrel berjaya auto bhd berjaya food bond market borneo utara highway brexit britain broadband budget 2018 budget revision bulk purchase of property bullish bullish market burse cloud computing cocoa coffee consumer staples consumption power cost of having a baby crane customer data debt investor deflation risk development downpayment for your home early election earnings per share economic outlook economic outlook 2016 economic sanction economics economy outlook ecoworld effective gross income egi election election budget electric utility electricity electricity bill electricity production endowment plan energy sector entertaiment eps essay european central bank eversendai eversendai corp export data family food beverage food services forecasts foreign-worker levy hike fundamental questions on retirement genting group genting plantation george soros global energy global stock market globetronic glove goldman great eastern group purchase of property has oil bottom? health higher price home business household & Personal product how low can ringgit drop? humor industrial package industry product interest internet investment income investment plan investment strategy iraq jack ma jack ma ready to take on the world jaks resources bhd japan jobless kimlun klci index knowledge land reclaimation work lawsuits life lifestyle lifestyle inflation liquefied natural gas (LNG) machine learning maintain buy malaysia government managing debt manchester united manufacture polyrethane product manufacturing marine engineering market closing market outlook markets mazda medical insurance metering microsoft earnings middle class monetary policy committee moneymaster mortgage movie negative nestle noon market offshore marine support services oil & gas services oil gain oil madness oil market oil production oil rally oil&gas oldtown opr hike patent petrol petrol chemical petroleum petronas gas pipeline project positive power generation power plant prime minister primus pacific private placement profitability ratios project reference property & infrastructure property development and investment putrajaya quantitative easing relative strength index (RSI) renewable energy reputational risk resources retail retailing retirement fund rhb research institute risk risks ruble salesforce sapurakencana petroleum savings for retirement scicom scientex scomi energy services bhd sector sell share markets share price shinzo abe shipbuilding shopping mall stagnation star publication (M) bHd starbucks statistics steel stock market bursa malaysia stock market investment stock price swiss swiss bank takaful tech technical indicator telco the malaysian insider the star thermo-vacuum form plastic packaging manufacturer time value money top gainers top losers trade volume index (TVI) traditional healthcare uchi tech umw holdings upstream oil & gas ursa malaysia value of compounding wal-mart effect warren buffet water related engineering wearable tech webe windows worldwide sales zecon