Three Things Making Malaysia Airports A Stock Pick Darling

“MAHB has never said that KLIA2 is a low-cost carrier terminal”, stresses the company’s newly appointed Chief Strategy Officer (CSO) Azli Mohamed.

“KLIA and KLIA2 share the same airport code – KUL – and KLIA2 serves as an extended terminal to KLIA” he said.

When asked about whether the public is aware of this, his immediate retort is that more has to be done to educate the public on the status of KLIA2.

“We know this is an uphill battle on informing the public. But that is part of the job, to let them know the difference between the various regulators and bodies, from the Malaysian Aviation Commission (MAVCOM), to the Department of Civil Aviation (DCA), and us, MAHB”.

Despite the brickbats thrown at MAHB by the public, the company itself is actually the darling of many stock pickers and analysts. JP Morgan set a target price of RM11.00, for example. (MAHB's share price closed at RM9.10 when this article was published on January 8, 2018)

Other analysts have the same bullish and optimistic view as well. So what drives the positives of the company?

In the interview with MAHB’s CSO, it seems there are three key areas why it is a stock pickers’ darling.

REASON 1: MALAYSIA AIRPORTS IS IN THE RIGHT PLACE, AND AT THE RIGHT TIME

Aeropolis is the next big thing in Malaysia. Other than the High-Speed Rail, the ‘airport city’ is drawing considerable attention with marquee business brands already slated to `land’ in KLIA Aeropolis, and more are set to firm up their commitment there.

Also in the making is the Digital Free Trade Zone (DFTZ). Alibaba’s Jack Ma and his local-firm Lazada are going to set the tone in the Asian logistics business.

“This is all part of the five-year business plan that MAHB has set back in 2016, called the Runway to Success 2020” reminded Azli. “We are not a reactive company, but a company with a well thought-out blueprint that maps out our intent on growing the business for the next few years” he added.

REASON 2: MALAYSIA AIRPORTS IS RUN BY AN INDUSTRIOUS AND DIVERSIFIED MANAGEMENT

MAHB’s current Managing Director, Datuk Badlisham Ghazali, was formerly the boss of Malaysia’s digital company, Malaysia Digital Economy Corporation (MDEC). The new CSO is formerly the boss of the Malaysian operations of General Electric, a multi-national outfit.

Their credentials and proven track record matter to stock pickers.

REASON 3: THEY ARE ESSENTIALLY, A CONSUMER COMPANY

Stock pickers love a consumer firm, and MAHB is undoubtedly a consumer company at heart.

In 2017, MAHB as a whole handled over 98 million passengers. “KLIA has a capacity to handle 25 million travellers, and KLIA2 over 45 million” Azli says. “This forces us to rethink how we do our operations” he stressed.

“Our focus is now just two: optimizing travellers experience through digitalization and big data; and operational excellence through cost optimization and process improvements”.

The video above also highlights Azli Mohamed's key management strategies that Malaysia Airports is deploying to achieve operational success

Podcast of the interview: