KLCI Stock - AIRPORT / 5014 - 2010 Quarter 2

Par Value: 1.00
Market Cap : 1100000000*5.45 = 5,995,000,000 (Large)
NTA per share : 3262946/1100000 = 2.97
P/BV : 5.42/2.97 = 1.8249
Forecast P/E now : (5.42-0.229)/0.3071 = 16.9 (High)
ROE : 10.74% (Moderate)
DY : 0.229/5.42*100 = 4.23% (Moderate)
Fixed Asset Turnover(3 year) : (0.325+0.2862+0.3)/3 = 0.3037 (Low)
Liquidity Ratio : 1194982/1444724 = 0.8271 (Moderate)
Receivables Collection Period : (721145+615499)/2/(1726146/365) = 141 days
My Target Price : Not interested unless revenue and profit increase more
My Decision : NOT BUY
My Comment : Revenue and profit decreasing, good cash flow, above moderate debt and increased, navps decreasing, economic growth, passenger traffic increasing, Cargo growing
Technical Support Price : 5
Risk Rating : MODERATE
OSK Target Price : 6.29 (18 Aug 10)

My notes based on 2010 quarter 2 report (number in '000):

- The consolidated revenue of the Group for the current quarter under review was 10.93% higher than the corresponding period last year

- The improved revenue in the current quarter under review was mainly contributed by the Group’s airport operations, driven by a stronger recovery in air travel demand. Passenger movements for the current quarter were 14.85% higher than the corresponding period last year, in which the international and domestic passenger movements improved by 26.29% and 6.13% respectively

- The improved revenue was also contributed by growth in the retail business as well as higher rental revenue derived from additional commercial space

- The improvement in revenue for the financial period-to-date under review was mainly contributed by a positive growth of 12.76% from the airport operations, driven by an 8.47% increase in aeronautical revenue together with a 17.74% increase in non-aeronautical revenue. The improvement in non-aeronautical revenue was mostly derived from retail businesses as well as rental of available commercial spaces

- Passenger movements for the financial period-to-date under review were 17.77% higher than the corresponding period last year, in which the international and domestic passenger movements improved by 28.75% and 9.20% respectively

- Revenue from non-airport operations, however, dropped by 4.33% from the corresponding period last year, mainly due to lower revenue recorded in project and repair maintenance services as well as the agriculture segment by 28.64% and 6.66% respectively. The reduction in revenue from project and repair maintenance services was mainly attributed to the lower number of projects secured during the period. Despite the higher Fresh Fruit Bunch price, revenue from the agriculture segment was lower than the same period of last year due to the lower total crop harvested (2010- 42,136MT/ RM493 vs. 2009- 55,071MT/ RM420) contributed by the clearing of a portion of the plantation land to make way for the construction of the new terminal

- Profit before tax and zakat (PBT) for the current quarter and financial period-to-date under review were lower than the corresponding period last year by 5.47% and 5.13% respectively, mainly due to the adoption of FRS 139 resulting in the higher share of losses in an associate company, whereby, the concession payable by the associate company was recognized at fair value and subsequently at amortized cost. Gains and losses arising from the changes in the fair value were recognized in the income statement. Besides, the lower PBT were also due to higher staff costs, utilities costs and provision for doubtful debts

- In addition, the PBT figure for the corresponding financial period-to-date under review in the preceding year had included a reversal of lease rental payable to the Government totaling RM 52.0 million and a backdated user fee amount in respect of financial year 2008 paid to the Government of RM45.8 million subsequent to the signing of the Operating Agreements

- There were also other one-off transactions pursuant to the signing of the Operating Agreements. However, after considering the said transactions, operationally, the Group had performed better as reflected by the higher passenger and revenue numbers

- The EP statement is disclosed on a voluntary basis. EP is a measure of value created by a business during a single period reflecting how much return a business makes over its cost of capital, that is, the difference between the Company’s rate of return and cost of capital

- The Group recorded an economic profit of RM6.31 million for current quarter under review as compared to RM7.26 million in the corresponding period last year and RM44.85 million for financial period-to-date under review as compared to RM 39.47 million in the corresponding period last year

- The consolidated revenue of the Group for the current quarter under review was slightly lower by 0.14% as compared to the immediate preceding quarter, mainly due to lower non-aeronautical revenue, albeit aeronautical revenue and revenue from non-airport operations were both higher compared to the preceding quarter

- Profit before tax for the current quarter under review was lower than the immediate preceding quarter by 32.11% mainly due to lower revenue and higher operating costs. The higher operating costs were mainly due to higher staff costs as a result from the payment of bonus and annual increment made in the current quarter and higher utilities consumption mainly electricity and chilled water. Repair maintenance expenses also increased due to higher maintenance works in the current quarter as compared to the immediate preceding quarter

- Estimate next 4Q eps after 2010 Q2 result announced = 0.3233*0.95 = 0.3071, estimate PE on current price 5.42 = 16.9(DPS 0.229)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.3429*0.9 = 0.3086 (10% drop from 0.3429), estimate highest/lowest PE = 17.24/14.81 (DPS 0.229)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.086*4 = 0.344, estimate highest/lowest PE = 13.97/12.89 (DPS 0.233)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.0758*4 = 0.3032, estimate highest/lowest PE = 15.72/11.36 (DPS 0.233)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.068*4 = 0.272, estimate highest/lowest PE = 13.18/11.6 (DPS 0.1855)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.0695*4 = 0.278, estimate highest/lowest PE = 13.07/10.27 (DPS 0.1855)
- Estimate next 4Q eps after 2008 Q4 result announced = 0.069*4 = 0.276, estimate highest/lowest PE = 12.37/7.63 (DPS 0.1855)

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