Malaysia Airport Berhad (invest)

Malaysia Airline Berhad (Stock Quote AIRPORT 5014) 

Incorporated in the year 1991, they mainly responsible is to manage the operation, management and maintenance of the airports in Malaysia. Licensed by the minister of transport as the only airport operator in Malaysia in year 1992 ( in other meaning, indirect monopoly) 

The reason i write this hubs is to share my opinion and idea on why Malaysia Airline Berhad is very attractive to purchase ( i recommend to buy but invest at your own risk as i will not responsible for any gain or loss that you make in the process... :D )

Like usual before we invest in any company, its crucial for us to know and understand its business nature, the pattern of its cash-flow, the profitability of the business, the cash reserves, the advantages and disadvantages it have and so on...After we carefully evaluate every important elements then only we decide whether we should purchase the stock or not. Its applicable to both fundamental and technical, as my own understanding fundamental is macro approach while technical is micro approach yet both are helpful when you understand and use them in any investment.

Malaysia Airport Holding Berhad managed 39 Airports in Malaysia, 5 of them are international, and with their most champion asset is Kuala Lumpur International Airport, won numerous award domestically and internationally.

Apart from that, Foreign Country Airport also choose them to manage their international airports due to their quality in servicing and managing.

Two in India, Indira Ghandi International Airport, Delhi and Rajiv Ghandi International Airport, Hyderabad. One in Kazakhstan, Astana International Airport, and one in Turkey, Sabiha Gokcen International Airport and another one in Maldives, Males International Airport...

With that above, they currently managing total of 44 Airports worldwide. 

Malaysia Airline have many of sources of income. But we will mention the primary one..

1. Rental from the shop lots.(it is not common shop lots,but high and luxury shop lots. The space is very expensive, one normal small medium size for a money changers banks can fetch a rental around RM50 to RM100 thousand per month. normal medium shop space can fetch around RM80 - RM150 thousand per month. and more...exclude the advertisement and banners around, its another charge.)

2. Royalties from shop lots. (among of their most profitable shop business; duty free for liquor, tobacco and chocolate, cosmetics, jewelry, and more. Their profit from the retail revenue has been generally increase from 35% plus to above 50%. Last year, one type of their retail shop provide them around RM360million plus in royalties exclude rental and other bonuses and that is just one type of their retail shop have not yet include bonus from other type of shops.)

3. Airport Tax. (In Malaysia or when you purchase using MAS airline or Air Asia airline ticket, other than the ticket price, it also include the airport tax, these airport tax is paid to Malaysia Airport Berhad. traffic x tax = huge amount of revenue.)

4. Air plane landing (generally when a plane landed on the airport ground, their company need to pay fees to the operator of the airport, if it land in Malaysia, it need to pay Malaysia Airline Berhad. (among the rumor is around RM10 - RM15 thousand per landing. i think we keep it low so that we are not overly optimistic. Imagine how many flight per day they have. plane land x fee = again is huge amount of revenue. Over 50 flight per day x RM10 thousand is around RM500 thousand daily in KLIA due to its business exclude LCCT, which is also another busy airport.)

5. And more others such as from managing foreign airport, profit sharing from its subsidiaries and other primary sources of income....Its cash-flow pattern is combination between cash term and credit term. Stable and Profitable Business..

generally the above is enough for us to set a based judgement ground to give some rough estimation value for the company and invest at what price.

Based on above, we definitely can buy Airport shares...but at what price is consider under, fair, or over value.

The most simple one is to know how much cash reserve, capital structures and debt ratio they have.

According to their annual report 2009 extract from bursa malaysia, let see some of their real cash revenue....

Generally, the revenue for year 2009 was RM1,637,100,000 and year 2008 at RM1,435,000,000

Profit before tax 2009 = RM 480,098,000 while at profit before tax 2008 was at RM422,200,000...profit growth of around 13% yearly...

Profits Sources

1. Duty free and non duty = RM133,284,000

2. Airport Services = RM 443,524,000

3. Agriculture and horticulture = RM 11,493,000

4. Hotel = RM 2,033,000

5. Repair & maintenance =(RM 39,385,000)

6. Other =(RM 70,851,000)

Retained earning (cash reserves) amounted = RM1,448,900,000

With total equity(what belong to the shareholders) of RM3,374,300,000 and total liabilities(what belong to the debtors) of RM 1,845,800,000

Currently with share price at around RM6.00 x total outstanding share 1.1Billion= Market Capitalization of RM6,600,000,000.... 

In the next five years, with current average growth of 13% through past year. I personally estimate that they market capitalization definitely worth more than RM11Billion...especially more projects coming with the growth of population increase, traffic increase, tourism sector blossom, and where to some people traveling is a routine especially for businesses purpose...

When the market capitalization worth more than RM11Billion...then its share price per piece will be worth around RM10 plus (with no changes in amount of issue share and par value)... which make u a total capital gain after 5 years or less in around 66.66% excluded dividend, 

With dividend from past 2 years above,

In 2008, they given out the first interim dividend of 4cents, and final dividend of 14.55cents.  

In 2009, they given out the first interim dividend of 8cents, and final dividend of 14.90cents.

In 2010, they given out the first interim dividend of 8cents, and final dividend (i personally forecast, must be greater than 15cents based on the dividend pattern above.

Averagely they given out around 23cent dividend yearly or a yield of 3.83%(F.D rate), although the dividend is not attractive, but we are targeting on their capital gain...66.6% after 5 years or less...(there is no guarantee for the earning, but if the growth are increase, definitely it will increase, in this 2010, its share price has increase from RM3.90 to RM6.00plus recently...in one year share price performance is already 53.8% increase...with 5 years outlook is consider achievable. and that provided world not end at 2012...)

Invest smart and wise with your hard earn money.