Airports│

April 10, 2015

Malaysia Airports Holdings COMPANY NOTE MAHB MK / MAHB.KL Current RM7.00 Market Cap Avg Daily Turnover Free Float Target RM7.45 US$3,184m US$2.25m 38.5% Prev. Target RM7.45 RM11,563m RM8.19m 1,639 m shares Up/Downside 6.4% Conviction| |

Notes from the Field Malaysia’s weakness to drag on This is the second in a two-part series on MAHB’s businesses in Malaysia and Turkey. We maintain our Hold call as the outlook for MAHB’s Malaysian business is weak, though Turkey is doing better than expected. We recommend switching to Westports.

———————————————————————————————————————— We maintain our DCF-based target Only Malindo is expected to grow Raymond YAP, CFA T (60) 3 2261 9072 price at RM7.45, discounting cash strongly, but this still has a E raymond.yap@.com flows to 2069, assuming that the relatively small base of traffic. KLIA concession is extended. There Costs to remain bloated are no forecast changes in this report. Costs are also expected to rise in FY15, Company Visit Expert Opinion Headwinds in Malaysia largely due to a full-year's recognition Channel Check Customer Views In the first part of our report released of KLIA2-related operating, ————————————————————————————————————————

Show Style "View Doc Map" yesterday, we concluded that the depreciation and interest costs.

outlook for Sabiha Gokcen is MAHB only recognised eight months good and better than originally of KLIA2-related costs in FY14. Contents expected. In this second instalment, Staying lukewarm we delve more deeply into MAHB’s BACKGROUND ...... 5 The outlook for earnings in FY15 is core Malaysian business. THE MALAYSIAN AIRPORT BUSINESS ...... 5 weak for MAHB, as we are expecting VALUATION AND RECOMMENDATION ...... 11 MAHB experienced a poor 2014, the overall group core net profit to fall

bogged down by (1) a severe from RM194m in FY14 to RM180m in slowdown in passenger traffic, and (2) FY15, a decline of 7.2%. We expect the higher operating and non-cash costs Malaysian core net profit to fall 33% following KLIA2’s commencement in yoy, but this will be partially offset by May 2014. As a result, core net profit the ISG’s return to profitability, with shrank 40% yoy in 2014, and if not for the net effect still down yoy on a a change in its depreciation policy, its group-wide basis. Given that the FY14 core net profit would have weighted average share base is declined even more. expected to rise from 1,431m shares in We think 2015 is unlikely to be a FY14 to 1,602m shares in FY15 as a fabulous year for MAHB’s Malaysian result of the 1-for-5 rights issue operations. Passenger traffic growth completed in late-March 2015, core in Malaysia should remain subpar this EPS is expected to fall 17.6% yoy to year due to (1) MAS’s intention to cut 11.2 sen in FY15. Given the capacity by 10%, (2) AirAsia's plan to uninspiring outlook for the MAHB defer new aircraft deliveries and group, we maintain our Hold rating deploy more aircraft overseas, and (3) on the stock. We recommend AAX's decision to scale down growth. switching to Westports.

Price Close Relative to FBMKLCI (RHS) Financial Summary 8.20 110.0 7.70 104.0 Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F 7.20 98.0 Revenue (RMm) 4,099 3,344 3,902 4,262 4,480 6.70 92.0 Operating EBITDA (RMm) 811 846 1,434 1,578 1,756 6.20 86.0 Net Profit (RMm) 389.2 748.6 173.6 167.4 249.0 5.70 80.0 12 10 Core EPS (RM) 0.25 0.13 0.11 0.14 0.22 8 6 Core EPS Growth (13.9%) (46.4%) (18.3%) 23.9% 66.2% 4

2 FD Core P/E (x) 27.87 49.72 60.31 51.82 34.48 Vol m Vol

Apr-14 Jul-14 Oct-14 Jan-15 DPS (RM) 0.11 0.05 0.07 0.07 0.08 Dividend Yield 1.59% 0.78% 1.03% 1.00% 1.13% Source: Bloomberg EV/EBITDA (x) 15.50 17.08 10.47 9.09 6.58

52-week share price range P/FCFE (x) NA NA 235.0 8.2 7.8 7.00 Net Gearing 73.7% 57.7% 39.0% 31.3% 22.2% 5.96 8.04 P/BV (x) 1.94 1.37 1.31 1.30 1.06 7.45 ROE 7.17% 3.20% 2.22% 2.52% 3.42% Current Target % Change In Core EPS Estimates 0% 0% 0% CIMB/consensus EPS (x) 0.73 0.47 0.78

SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Sources: CIMB. COMPANY REPORTS Designed by Eight, Powered by EFA

Malaysia Airports Holdings│Malaysia April 10, 2015

PEER COMPARISON

Research Coverage Bloomberg Code Market Recommendation Mkt Cap US$m Price Target Price Upside Malaysia Airports Holdings MAHB MK MY HOLD 3,184 7.00 7.45 6.4%

Westports Holdings WPRTS MK MY ADD 3,765 4.01 4.53 13.0%

Rolling P/BV (x) 12-month Forward Rolling FD P/E (x) 9.00 50.0 8.00 45.0 7.00 40.0 6.00 35.0 30.0 5.00 25.0 4.00 20.0 3.00 15.0 2.00 10.0 1.00 5.0 0.00 0.0 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Malaysia Airports Holdings Westports Holdings Malaysia Airports Holdings Westports Holdings

Peer Aggregate: P/BV vs ROE Peer Aggregate: 12-mth Fwd FD P/E vs FD EPS Growth 3.50 25.0% 40.0 120%

3.00 21.4% 35.0 95% 30.0 70% 2.50 17.9% 25.0 45% 2.00 14.3% 20.0 20% 1.50 10.7% 15.0 -5% 1.00 7.1% 10.0 -30% 0.50 3.6% 5.0 -55% 0.00 0.0% 0.0 -80% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs) 12-mth Fwd FD P/E (x) (See Footnote) (lhs) FD EPS Growth (See Footnote) (rhs)

Valuation FD P/E (x) (See Footnote) P/BV (x) EV/EBITDA (x) Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 Malaysia Airports Holdings 49.72 60.31 51.82 1.37 1.31 1.30 17.08 10.47 9.09 Westports Holdings 26.16 28.34 26.56 7.75 7.25 6.79 17.95 16.72 16.11

Growth and Returns FD EPS Growth (See Footnote) ROE (See Footnote) Dividend Yield Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 Dec-14 Dec-15 Dec-16 Malaysia Airports Holdings -44.0% -17.6% 16.4% 3.2% 2.2% 2.5% 0.78% 1.03% 1.00% Westports Holdings 24.4% -7.7% 6.7% 31.0% 26.4% 26.4% 2.81% 2.65% 2.82%

SOURCE: CIMB, COMPANY REPORTS

Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends. NPAT/EPS values for calculations and valuations are based on recurring and normalised values for GAAP and IFRS accounting standard companies respectively.

2

Malaysia Airports Holdings│Malaysia April 10, 2015

BY THE NUMBERS

Share price info P/BV vs ROE 12-mth Fwd FD Core P/E vs FD Core EPS Share px perf. (%) 1M 3M 12M 2.50 12.0% 70.0 Growth 20% Relative -1.6 8.1 -7.1 60.0 9% 2.00 9.6% Absolute 1.6 14.9 -7.5 50.0 -3% 1.50 7.2% Major shareholders % held 40.0 -14% 1.00 4.8% 30.0 -26% Khazanah Nasional 36.6 20.0 -37% 0.50 2.4% Employees Provident Fund 13.1 10.0 -49% 0.00 0.0% Permodalan Nasional Berhad 11.8 0.0 -60% Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs) 12-mth Fwd Rolling FD Core P/E (x) (lhs) FD Core EPS Growth (rhs)

Profit & Loss

MAHB is stuck with two years’ of weak (RMm) Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F core earnings of below RM200m in Total Net Revenues 4,099 3,344 3,902 4,262 4,480 Gross Profit 811 846 1,434 1,578 1,756 FY14 and FY15 as a result of the Operating EBITDA 811 846 1,434 1,578 1,756 expanded cost base as a result of the Depreciation And Amortisation (278) (405) (712) (808) (915) commissioning of KLIA2 on 2 May Operating EBIT 533 441 722 770 841 2014. We do not expect the Financial Income/(Expense) (12) (135) (592) (585) (572) consolidation of ISG’s earnings from Pretax Income/(Loss) from Assoc. (39) (53) 8 8 8 the start of FY15 to make a big Non-Operating Income/(Expense) 0 0 158 158 158 difference until FY17. Profit Before Tax (pre-EI) 483 253 297 351 436 Exceptional Items 68 581 22 0 0 Pre-tax Profit 551 834 318 351 436 Taxation (162) (86) (145) (184) (187) Exceptional Income - post-tax Profit After Tax 389 749 174 167 249 Minority Interests 0 0 0 0 0 Preferred Dividends 0 0 0 0 0 FX Gain/(Loss) - post tax Other Adjustments - post-tax Net Profit 389 749 174 167 249 Recurring Net Profit 324 194 180 223 306 Fully Diluted Recurring Net Profit 324 194 180 223 306

Cash Flow

(RMm) Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F EBITDA 811 846 1,434 1,578 1,756 In FY15, disposal of 10% stake in Cash Flow from Invt. & Assoc. Airport for US$79m, and Change In Working Capital 191 (720) (155) 180 1 payment for the final 40% stake in ISG (Incr)/Decr in Total Provisions costing €279m. Other Non-Cash (Income)/Expense Other Operating Cashflow 56 370 (412) (427) (413) Net Interest (Paid)/Received 24 161 434 427 413 Tax Paid (162) (86) (145) (184) (187) Cashflow From Operations 920 571 1,156 1,574 1,570 Capex (1,918) (685) 0 0 0 Disposals Of FAs/subsidiaries 6 (49) (851) 0 0 Acq. Of Subsidiaries/investments 0 0 0 0 0 Other Investing Cashflow (26) 4 0 0 0 Cash Flow From Investing (1,939) (731) (851) 0 0 Debt Raised/(repaid) 700 50 (259) (157) (224) Proceeds From Issue Of Shares 0 980 1,316 0 0 Shares Repurchased 0 0 0 0 0 Dividends Paid (53) (12) (12) (87) (119) Preferred Dividends Other Financing Cashflow (24) (161) 837 (434) (427) Cash Flow From Financing 623 857 1,882 (678) (770) Total Cash Generated (395) 697 2,187 896 800 Free Cashflow To Equity (318) (109) 46 1,417 1,346 Free Cashflow To Firm (1,042) (321) (129) 1,147 1,156

SOURCE: CIMB RESEARCH, COMPANY

3

Malaysia Airports Holdings│Malaysia April 10, 2015

BY THE NUMBERS

Balance Sheet

(RMm) Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F Total Cash And Equivalents 345 2,041 2,621 3,130 3,685 We expect net gearing of 23% in Total Debtors 558 717 837 914 961 FY15. Inventories 122 154 154 154 154 Total Other Current Assets 0 0 0 0 0 Total Current Assets 1,026 2,912 3,612 4,198 4,800 Fixed Assets 324 363 363 363 363 Total Investments 0 0 0 0 0 Intangible Assets 8,262 17,330 16,880 16,434 15,781 Total Other Non-Current Assets 902 1,347 2,206 2,214 2,222 Total Non-current Assets 9,487 19,039 19,449 19,011 18,367 Short-term Debt 200 706 706 706 706 Current Portion of Long-Term Debt Total Creditors 917 2,976 2,941 3,199 3,246 Other Current Liabilities 48 32 32 32 32 Total Current Liabilities 1,165 3,714 3,679 3,936 3,984 Total Long-term Debt 3,600 5,619 5,361 5,203 4,979 Hybrid Debt - Debt Component Total Other Non-Current Liabilities 1,058 5,196 5,196 5,196 5,196 Total Non-current Liabilities 4,658 10,816 10,557 10,400 10,176 Total Provisions 0 0 0 0 0 Total Liabilities 5,823 14,529 14,236 14,336 14,159 Shareholders' Equity 4,689 7,422 8,825 8,874 9,007 Minority Interests 0 0 0 0 0 Total Equity 4,689 7,422 8,825 8,874 9,007

Key Ratios

Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F Revenue Growth 15.5% (18.4%) 16.7% 9.2% 5.1% ISG is consolidated as a 100% Operating EBITDA Growth (4.3%) 4.3% 69.5% 10.0% 11.3% subsidiary from January 2015. Prior to Operating EBITDA Margin 19.8% 25.3% 36.8% 37.0% 39.2% April 2014, it was equity accounted as Net Cash Per Share (RM) (2.65) (2.95) (2.09) (1.68) (1.47) a 20% associate. From April 2014, it BVPS (RM) 3.60 5.11 5.34 5.37 6.60 was equity accounted based on a 60% Gross Interest Cover 18.80 2.91 1.17 1.26 1.41 interest. Effective Tax Rate 29.4% 10.3% 45.5% 52.4% 42.9% Net Dividend Payout Ratio 30.1% 34.4% 40.1% 32.8% 30.0% Accounts Receivables Days 53.35 69.60 72.68 75.19 76.37 Inventory Days 12.26 20.16 22.80 21.02 20.66 Accounts Payables Days 95.4 284.5 437.5 418.6 431.8 ROIC (%) 5.53% 3.59% 3.20% 3.31% 3.75% ROCE (%) 6.89% 4.11% 5.22% 5.35% 5.89%

Key Drivers

(RM) Dec-13A Dec-14A Dec-15F Dec-16F Dec-17F Int'l Passenger Traffic Growth (%) 16.8% 4.7% 4.5% 5.4% 6.0% These growth drivers illustrate the Domestic Pax Traffic Growth (%) 19.9% 4.4% 6.1% 4.5% 5.2% Malaysian business only. International Flight Traffic Growth (%) 14.1% 7.3% 4.3% 3.9% 4.5% Domestic Flight Traffic Growth (%) 14.1% 7.3% 4.3% 3.9% 4.5% Int'l Pax Service Charge 65.0 71.0 71.0 71.0 71.0 Dom Pax Serv Charge 9.0 9.0 10.0 10.0 10.0 Unit Meals Produced (% Change) N/A N/A N/A N/A N/A

SOURCE: CIMB RESEARCH, COMPANY

4

Malaysia Airports Holdings│Malaysia April 10, 2015

Malaysia’s weakness to drag on

BACKGROUND Headwinds for MAHB in Malaysia MAHB experienced a poor 2014, bogged down by (1) a severe slowdown in passenger traffic, and (2) higher operating and non-cash costs following KLIA2’s commencement in May 2014. As a result, core net profit shrank 40% yoy in 2014, and if not for a change in its depreciation policy in 4Q14, its FY14 core net profit would have declined by a staggering 71% yoy to RM93m. We think the company is not out of the woods yet, and 2015 is unlikely to be a fabulous year for its Malaysian operations. Passenger traffic growth in Malaysia should remain subpar this year due to (1) Malaysia ’s (MAS) intention to cut capacity by 10%, (2) AirAsia's plan to defer new aircraft deliveries and deploy more aircraft at its overseas associates, and (3) AirAsia X's decision to wet lease a number of its aircraft to European operators during the slow Southern Hemisphere winter season. We also expect costs to rise in FY15, largely due to a full-year's recognition of KLIA2-related operating, depreciation and interest costs (MAHB only recognised eight months of KLIA2-related costs in FY14). MAHB's share price has also been bogged down by the recently completed rights issue, which has increased the company's share base by 20% and will result in EPS dilution this year.

Better-than-expected performance in Turkey While headwinds abound for MAHB's Malaysian operations, the Turkey operation is expected to perform better than expected over the next few years. We refer readers to the first part (published yesterday) of our two-part report for more details on the Istanbul Sabiha Gokcen (ISG) business.

THE MALAYSIAN AIRPORT BUSINESS Dragged down by pedestrian passenger traffic growth, and significant rise in cost base MAHB's Malaysian operations performed very poorly in 2014, and we expect the numbers to look even more challenging in 2015. We expect its Malaysian core net profit to fall from RM194m in FY14 to only RM130m in FY15, as the full-year costs of running KLIA2, which was commissioned on 2 May 2014, will more than offset the incremental revenue from weak passenger traffic growth and the incremental rental and duty-free sales from a fully-operational KLIA2. Pedestrian passenger traffic growth of 5.3% expected in 2015. We expect MAHB to grow its Malaysian traffic base by only 5.3% this year. While this may be faster than last year’s 4.6% growth, it falls significantly short of the 18.4% traffic growth MAHB experienced in 2013. In fact, the 3-year CAGR of passenger traffic was 11% between 2010 and 2013, but this is expected to slow down to just 5% CAGR between 2013 and 2016. The strong traffic growth between 2010 and 2013 was on the back of aggressive capacity expansion put in place by the two major Malaysian airlines, on top of the entry of in March 2013. By 2Q14, the yoy growth comparisons began to fizzle out and drop into negative territory – partly because of the high base effect, but mainly because of the MH370 incident in March 2014 and the MH17 incident in July 2014 which

5

Malaysia Airports Holdings│Malaysia April 10, 2015

affected sentiment for travel to Malaysia from the core markets of China and . AirAsia also scaled back its capacity growth in FY14 to just 3.6%, from 12.3% in FY13, as it attempted to improve its profitability by reducing capacity additions. MAHB’s traffic growth in 2015 will be held back by a planned 10% capacity cut by MAS, lacklustre capacity expansion of just 7% by AirAsia and 5% by AirAsia X. We are forecasting MAHB’s passenger traffic to rise 5.3% in FY15 and 4.9% in FY16. Conversely, we are forecasting Malindo to grow its passenger traffic by 45% this year, although its base is still small and does not move the needle too much for MAHB. We gather from our discussions with the Centre for -Pacific Aviation that Thai and Malindo may between them add up to 21 new B737-800s in total in 2015, while and Malindo may between them add up to 12 ATR-600 turboprops. The may add up to 51 aircraft in 2015, comprising 7 x A320s (to ), 29 x B737-800s (five to Batik Air, three to Lion Air, and 21 split between and Malindo), 3 x A330-300s to Lion Air, and 12 x ATR-600s split between Wings Air and Malindo. Do note that the aircraft allocation within the Lion Air group is flexible and may change during the year.

Figure 1: KLIA MTB passenger traffic Figure 2: KLIA2 passenger traffic

yoy change (%) - LHS KLIA2 traffic - RHS 4% 2,500,000 10% 2,500,000 yoy change (%) - LHS KLIA MTB traffic - RHS 2% 2,400,000 8% 2,400,000

2,300,000 2,300,000 0% 6% 2,200,000 2,200,000 -2% 4% 2,100,000 2,100,000 -4% 2% 2,000,000 2,000,000 -6% 0% 1,900,000 1,900,000 -8% -2% 1,800,000 1,800,000 -10% -4% 1,700,000 1,700,000

-12% 1,600,000 -6% 1,600,000

-14% 1,500,000 -8% 1,500,000

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

Figure 3: KLIA and LCCT's passengers (m)

30% 6.0 yoy growth % - LHS KLIA and LCCT/KLIA2's pax (m) 25% 5.0

20%

4.0 15%

10% 3.0

5% 2.0

0%

1.0 -5%

-10% 0.0 J F MAMJ JAS ONDJ F MAMJ JAS ONDJ FMAMJ JAS ONDJ F MAMJ JASONDJ F MAMJ JASONDJ F MAMJ JASONDJ F 09 10 11 12 13 14 15 SOURCES: CIMB, COMPANY REPORTS

6

Malaysia Airports Holdings│Malaysia April 10, 2015

Flymojo is planning to launch a new full-service airline in early 2016, deploying CS100 jets. Firm orders for 20 have been placed with Bombardier, with options for 20 additional planes. The airline will be based out of Bahru Senai airport (which MAHB does not operate) and airport. We think Flymojo will be too small in the initial years to make an impact on MAHB. Also, MAHB usually gives generous rebates and incentives to start-up airlines.

Figure 4: MAHB’s overall annual passenger traffic

20% 100,000 yoy change (%) - LHS MAHB passenger traffic ('000) - RHS 18% 90,000 16%

14% 80,000 12%

10% 70,000

8% 60,000 6%

4% 50,000 2%

0% 40,000 2010 2011 2012 2013 2014 2015F 2016F 2017F

SOURCES: CIMB, COMPANY REPORTS

Non-aeronautical airport operations to improve We expect a full-year’s contribution of rental and retail income from KLIA2 to benefit MAHB. MAHB suffered a loss of rental and retail income in the initial months after KLIA2 opened its doors in May 2014, as shops at LCCT were closed while a considerable number of retail outlets at KLIA2 were still undergoing renovations at the time. MAHB only began to collect rental from its tenants when renovations had completed and the stores ready for operation, resulting in the loss of one month’s rental at KLIA2 during FY14. In addition, the largest Eraman duty-free store in KLIA2 only started operations in September 2014, which resulted in at least four months of significantly lower retail revenues. After just a marginal 1% yoy improvement in retail revenue in 2014, retail revenue in 2015 is likely to be substantially higher, up by 16% yoy based on our estimate, mainly due to the low base effect. Rental revenues should remain high, also increasing by 16% yoy, in our view. As such, we expect non-aeronautical airport revenue to expand by a healthy 15% yoy in FY15, faster than the 6% growth we project for aeronautical revenue. Aeronautical revenue's growth is lower than our projected passenger traffic growth of 5.3% because much of the traffic growth will be coming from the low-cost carrier (LCC) segment. LCCs are based in KLIA2 and pay lower passenger service charges (PSC).

7

Malaysia Airports Holdings│Malaysia April 10, 2015

Malaysian operations bogged down by massive costs Depreciation to rise. MAHB will recognise 12 months of KLIA2-related depreciation, compared with just eight months in FY14. Therefore, we expect it to book in RM502m in depreciation in FY15, up from RM405m in FY14. Also, it is important to note that MAHB has changed its depreciation policy from a straight-line method to a unit-of-production method in 4Q14, backdated to the start of FY14, which has the impact of reducing the overall depreciation charge. Interest expense to increase. Another cost that will be increasing this year is interest expense. As MAHB is no longer able to capitalise KLIA2-related interest cost since the terminal commenced operations in May 2014, interest expense has increased to a run-rate of around RM50m-55m every quarter. We expect interest cost to rise by 39% yoy to RM210m in FY15, from RM151m in FY14, due to the full-year recognition of KLIA2-related interest expense. Airline incentive payments to drop. Meanwhile, airline incentives should decline in FY15. MAHB underprovided for airline incentives in FY13 as traffic growth in FY13 was stronger than expected. As a result, an incremental RM24m airline incentive charge was registered in 2Q14, with respect to incentives that should have been accrued in FY13. Since FY14's traffic growth did not beat expectations, a back-dated airline incentive charge is unlikely to occur in FY15. Coupled with the view that traffic growth will be mild this year, we expect airline incentive payments to drop by 21% yoy from RM108m in FY14 to RM85m in FY15. Utility expenses to rise mildly. The government decided to lower average electricity tariffs in Peninsular Malaysia by 5.8% to 36.3 sen/kWh in February 2015 amid declining fuel prices. The reduction will help to bring down MAHB's utility cost, which in FY14 amounted to RM289m. Utility expense rose by 37% yoy last year, driven by (1) a 15% hike in electricity tariffs, (2) a 20% increase in gas tariffs, and (3) higher utility consumption following the commencement of KLIA2. We expect utility expenses to rise in FY15 due to the full-year operation of KLIA2. The increase should nonetheless be relatively mild as a result of the electricity tariff reduction. We expect utility cost to increase 4.7% yoy to RM302m.

MAHB's 4Q14 and 2014 results highlights - closing the year on a weak note Small adjusted net loss of RM0.8m in 4Q14. Against the impressive 1,200% yoy reported net profit increase in 4Q14, MAHB actually made a marginal adjusted net loss of RM0.8m, comprising a core net profit of RM100m after excluding exceptional items, and after removing some RM101m in gains arising from the change in accounting depreciation estimate. Core net profit fell 40% yoy in 2014, largely due to higher costs following the commencement of KLIA2 on 2 May 2014. This is the third consecutive quarter of low earnings post the commissioning of KLIA2, because of the additional depreciation and operating cost burden, which more than offset MAHB’s accrual for higher PSC since February 2014 (to be paid by government in 2015), and collecting higher landing charges since January 2014. From a cash earnings perspective (operating cashflow, less net interest paid, less taxes paid), MAHB’s cash earnings halved from RM862m in FY13 to RM410m in FY14. Even if we assume MAHB had collected the RM80m from the government as PSC compensation, cash earnings would have still declined considerably. The higher cost base post-KLIA2 coincided with a period of sharply lower passenger traffic growth of just 4.6% yoy in FY14, compared with 18.4% yoy growth in FY13. Growth in 2H14 was negative 1.5% yoy.

8

Malaysia Airports Holdings│Malaysia April 10, 2015

Figure 5: MAHB's quarterly earnings (RM m)

FYE Dec 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 4QFY14 4QFY13 Cum Cum Revenue 1,027.2 978.2 972.7 1,121.1 781.1 1,175.5 675.8 711.3 3,343.7 4,099.1 Operating costs (798.1) (798.4) (759.4) (932.2) (534.3) (1,010.0) (479.4) (473.9) (2,497.5) (3,288.1) EBITDA 229.1 179.7 213.3 188.9 246.8 165.6 196.4 237.4 846.2 811.0 EBITDA margin (%) 22.3 18.4 21.9 16.8 31.6 14.1 29.1 33.4 25.3 19.8 Depn & amort. (60.3) (64.5) (73.8) (79.2) (66.1) (134.4) (137.0) (67.9) (405.4) (277.9) EBIT 168.8 115.2 139.5 109.6 180.7 31.2 59.4 169.6 440.8 533.1 Interest expense (5.9) (7.6) (8.8) (6.1) (7.3) (36.8) (54.5) (52.7) (151.3) (28.4) Interest & invt inc 4.1 3.9 4.3 4.1 5.8 2.2 3.9 4.0 15.9 16.4 Associates' contrib (0.5) 3.6 0.5 (41.9) (1.0) (52.3) 1.8 (1.2) (52.6) (38.3) Exceptionals 19.6 16.8 15.5 16.7 0.7 18.0 - 562.6 581.4 68.6 Pretax profit 186.1 132.0 151.0 82.4 179.0 (37.7) 10.6 682.3 834.2 551.5 Tax (59.5) (30.2) (38.2) (33.9) (50.3) (6.9) (9.0) (19.4) (85.6) (161.9) Tax rate (%) 32.0 22.9 25.3 41.2 28.1 (18.4) 84.6 2.8 10.3 29.4 Minority interests ------0.0 0.0 - Net profit 126.5 101.8 112.8 48.5 128.7 (44.7) 1.6 662.9 748.5 389.6 Core net profit 90.5 67.9 88.7 77.2 114.6 (22.5) 1.6 100.3 194.0 324.3 EPS (sen) 9.9 7.9 8.7 3.7 9.4 (3.1) 0.1 45.6 52.0 30.2 Core EPS (sen) 7.1 5.3 6.9 5.9 8.3 (1.6) 0.1 6.9 13.8 25.1 SOURCES: CIMB, COMPANY REPORTS

A change in depreciation policy. During 4Q14, MAHB decided to change its depreciation policy from the typical "straight line (SL) method" to a "unit of production (UoP) method", resulting in a 50% qoq decline in depreciation. Had MAHB not change its depreciation policy, 4Q14 and FY14 depreciation would have each been RM101m higher. Unlike the SL method, which depreciates an asset by the same amount every year over the life of the asset, the UoP method depreciates based on the number of passengers the asset is expected to handle over its useful life. Since passenger traffic is expected to increase over time, depreciation in the early years (i.e. now) will be lower while depreciation towards the end of the concession will be higher. Bejing Capital International Airport (694 HK), (SYD AU), Airports of (AOT TB), and TAV Airports (TAVHL TI) all use the traditional SL method of amortisation/depreciation for their concession assets and fixed assets. However, Istanbul Sabiha Gokcen (ISG) has been using the UoP method to amortise its concession assets, and now, MAHB has chosen to follow the accounting practice of its Turkish wholly-owned subsidiary. Exceptionals aplenty. There were also a number of key exceptional items to take note of for 4Q14, totalling RM563m:  RM503m remeasurement gain. MAHB hired an independent valuer who valued its 100% stake in ISG to be worth €800m. As the book value of its original 20% stake in ISG is lower than €160m (€800m x 20%), a remeasurement gain was recognised,  RM379m bargain purchase gain. MAHB's acquisition cost for the remaining 80% in ISG totaled €488m (€209m + €279m), less than the €640m implied by the independent valuer's valuation,  RM229m goodwill impairment for LGM Havalimani Isletmeleri Ticaret ve Turizm (LGM is the operator of hotels, lounges, food and beverage outlets, etc., within the SAW airport complex),  RM51m writeoff for the LCCT assets,  RM15m impairment loss on unquoted shares, and  RM24m one-off transaction costs relating to the ISG acquisition. Removing these elements out of its 4Q14 reported net profit of RM663m, MAHB would have made a marginal adjusted net loss of RM0.8m. (RM663m

9

Malaysia Airports Holdings│Malaysia April 10, 2015

reported net profit, minus RM563m exceptional items, minus RM101m in lower depreciation charge from change in accounting policy). Retail arm in losses. Eraman, the retail arm selling duty-free products, made an EBITDA loss for the third consecutive quarter due to higher rental costs at KLIA2. Though the KLIA2 opened its doors in May 2014, the flagship Eraman store there was only ready in September 2014, leading to lost opportunities. Balance sheet gearing declined. MAHB consolidated ISG at end-FY14, so the balance sheet now reflects the combined Malaysia and Turkey businesses. The net gearing position has declined from 74% at end-FY13, to 58% at end-FY14. This was due to (1) RM998m of the perpetual sukuk that was issued on 15 December 2014 was classified as equity, (2) the RM972m in private placement on 12 March 2014, and (3) RM134m in dividends that was reinvested into new shares. The net debt level increased from RM3.45bn at end-FY13 to RM4.28bn at end-FY14 (or RM5.28bn if we treat the perpetual sukuk as an interest-bearing debt).

One-for-five rights issue completed MAHB recently raised proceeds of RM1.3bn after completing the 1-for-5 rights issue on 27 March 2015. A total of 275.3m new shares were issued at a price of RM4.78 each.

10

Malaysia Airports Holdings│Malaysia April 10, 2015

VALUATION AND RECOMMENDATION Maintain Hold and an unchanged target price of RM7.45 We downgraded MAHB from Add to Hold in May 2014 on concerns that several major airlines in Malaysia could cut capacity amid burgeoning losses. This was followed by a period of lacklustre share price performance on the back of:  slowing passenger traffic growth as a result of the supernormal expansion by the Malaysian carriers in 2013,  the MH370 and MH17 incidents which caused a drop in inbound tourist arrivals from China and Australia,  poor profit performance by MAHB after KLIA2 opened on 2 May 2014, which resulted in a jump in operating, financial and depreciation costs, and  the announcement of a dilutive rights issue in November 2014 in order to fund the purchase of 40% of ISG, which took its stake in ISG to 100%. The outlook for earnings in FY15 is weak for MAHB, as we expect the overall group core net profit to fall from RM194m in FY14 to RM180m in FY15, a decline of 7.2%. We expect the Malaysian core net profit to fall 33% yoy, but this will be partially offset by ISG’s recovery to profitability, with the net effect still down yoy on a group-wide basis. Given that the weighted average share base is expected to rise from 1,431m shares in FY14 to 1,602m shares in FY15 as a result of the 1-for-5 rights issue completed in late-March 2015, core EPS is expected to fall 17.6% yoy to 11.2 sen in FY15. Given the uninspiring outlook for the MAHB group, we maintain our Hold rating for the stock. We keep our DCF-based target price at RM7.45. We recommend switching to Westports.

Figure 6: Discounted cashflow valuation (RM m)

Malaysia - PV of free cash flow (2016-2034) 8,486 Malaysia - PV of free cash flow (2035-2069) 3,728 Perpetuity (2070 onwards) Less : Net debt -2,635 DCF value of Malaysia business (RM m) 9,579

Value of 100% of ISG (€ m) 667 RM:€1 4.10 DCF value of 100% of ISG (RM m) 2,735 Total DCF value of the MAHB group (RM m) 12,314 No of shares (m) 1,652 NPV per share (RM/share) 7.45 SOURCES: CIMB, COMPANY REPORTS

11

Malaysia Airports Holdings│Malaysia April 10, 2015

Accounting for 100%-owned ISG. The consolidation of ISG into MAHB's books beginning January 2015 is likely to lead to a 45% yoy increase in operational revenue, despite the Malaysian revenue rising by only 9.5%. We expect ISG revenue to grow by 17%. Since ISG is EBITDA-positive (76% EBITDA margin, excluding jet fuel-related revenue), MAHB's group EBITDA is estimated to grow by 106% yoy, with the Malaysian and Turkish EBITDA growing by 14% and 22%, respectively. We forecast group core net profit to fall 7.2% yoy in FY15 to RM180m, with the Malaysian profits falling 33% yoy, partially offset by the ISG’s return to profitability.

Figure 7: MAHB group

PROFIT & LOSS (RM m, FYE Dec) 2011 2012 2013 2014 2015F 2016F 2017F

Revenue 2,754.8 3,548.2 4,098.8 3,343.7 3,902.2 4,261.6 4,480.1 Operating expenses (1,983.8) (2,700.1) (3,287.4) (2,497.5) (2,468.1) (2,684.1) (2,723.9) EBITDA 771.0 848.1 811.3 846.2 1,434.1 1,577.5 1,756.1 Depreciation & amortisation (174.4) (221.3) (277.9) (405.4) (711.8) (807.5) (914.8) EBIT 596.6 626.8 533.5 440.8 722.2 770.0 841.4 Net interest & invt income (18.8) (0.5) (12.0) (135.4) (433.6) (426.6) (413.5) Associates' contribution (59.1) (17.8) (38.6) (52.6) 8.0 8.0 8.0 Exceptional items 34.8 (33.6) 68.3 581.4 21.7 - - Pretax profit 553.4 574.9 551.1 834.2 318.4 351.4 435.9 Tax (173.0) (208.5) (161.9) (85.6) (144.8) (184.0) (186.9) Minority interests (0.0) ------Net profit 380.4 366.4 389.2 748.6 173.6 167.4 249.0 Core net profit 366.4 369.8 324.3 194.0 180.2 223.2 306.2 SOURCES: CIMB, COMPANY REPORTS

Figure 8: MAHB’s revenue by geography (RMm)

5,000 Title: Operational revenue (RMm) Malaysia Turkey Source: 4,500 Please fill in the values above to have them entered in your report 4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0 2010 2011 2012 2013 2014 2015F 2016F 2017F

SOURCES: CIMB, COMPANY REPORTS

12

Malaysia Airports Holdings│Malaysia April 10, 2015

Figure 9: MAHB’s EBITDA by geography (RMm)

2,000 Title: EBITDA (RMm) Malaysia Turkey Source: 1,800 Please fill in the values above to have them entered in your report 1,600

1,400

1,200

1,000

800

600

400

200

0 2010 2011 2012 2013 2014 2015F 2016F 2017F SOURCES: CIMB, COMPANY REPORTS

Figure 10: MAHB’s core net profit by geography (RMm)

Core net profit (RMm) Malaysia Turkey 500 Title: Source:

400 Please fill in the values above to have them entered in your report

300

200

100

0

-100

-200 2010 2011 2012 2013 2014 2015F 2016F 2017F

SOURCES: CIMB, COMPANY REPORTS

Outlook for Malaysia We are forecasting passenger traffic growth of 5.3% in 2015, more optimistic than management's guidance of 3%, given the low traffic base in 2014 as well as an expected improvement in AirAsia's passenger numbers as it reactivates aircraft idled in 2014. Rental and retail incomes are set to grow this year as MAHB will enjoy a full-year contribution from KLIA2's retail operations, potentially leading to a 15% yoy improvement in non-aeronautical airport revenue. In addition, airline incentive payment charges should decline this year, while utility costs should only increase mildly following the 5.8% reduction in electricity tariffs from February 2015. Nevertheless, we expect the Malaysian business to contribute lower core net profits of RM130m in FY15, down 33% from RM194m in FY14. Although we project Malaysia’s operating EBITDA to rise 14% yoy from RM846m to RM934m, we expect this to be more than consumed by the rise in depreciation and interest expenses, because MAHB only accounted for eight months’ worth of depreciation and interest expense from KLIA2 in FY14 (from its commissioning on 2 May 2015).

13

Malaysia Airports Holdings│Malaysia April 10, 2015

Figure 11: Malaysia Airports Holdings (Malaysia biz only)

PROFIT & LOSS (RM m, FYE Dec) 2011 2012 2013 2014 2015F 2016F 2017F

Revenue 2,754.8 3,548.2 4,098.8 3,343.7 2,938.0 3,145.8 3,317.1 Operating expenses (1,983.8) (2,700.1) (3,287.4) (2,497.5) (2,004.0) (2,109.0) (2,218.5) EBITDA 771.0 848.1 811.3 846.2 934.0 1,036.8 1,098.6 Depreciation & amortisation (174.4) (221.3) (277.9) (405.4) (501.7) (578.4) (666.8) EBIT 596.6 626.8 533.5 440.8 432.2 458.4 431.8 Net interest & invt income (18.8) (0.5) (12.0) (135.4) (194.0) (190.8) (187.8) Associates' contribution (59.1) (17.8) (38.6) (52.6) 8.0 8.0 8.0 Exceptional items 34.8 (33.6) 68.3 581.4 21.7 - - Pretax profit 553.4 574.9 551.1 834.2 267.9 275.6 252.0 Tax (173.0) (208.5) (161.9) (85.6) (116.5) (128.2) (129.7) Minority interests (0.0) ------Net profit 380.4 366.4 389.2 748.6 151.4 147.4 122.3 Core net profit 366.4 369.8 324.3 194.0 129.7 147.4 122.3 SOURCES: CIMB, COMPANY REPORTS

Outlook for Turkey Meanwhile, MAHB's Turkish operation is expected to do better than expected. Traffic growth at ISG is likely to exceed our previous forecast on the back of impressive capacity additions by Pegasus and . With passenger traffic likely to increase by 19.6% yoy in 2015, following a stellar 26.9% rise in 2014, we expect the airport to record its maiden core net profit of €12.6m in FY15 (we previously forecasted core net loss of €30m), and against an actual core net loss of €33.3m in FY14. ISG's contribution to MAHB is poised to grow rapidly in the coming years as the Turkish airport is at the inflection point for profitability with massive operating leverage. Net profit growth is set to be especially strong in 2017, as the airport’s second runway is expected to be opened for operations in mid-2017, and potentially accounting for 60% of MAHB's group core net profit. Please see our report yesterday for further details on ISG.

Figure 12: Istanbul Sabiha Gokcen (ISG)

PROFIT & LOSS (€ m, FYE Dec) 2011 2012 2013 2014 2015F 2016F 2017F

Revenue 275.3 275.6 214.3 205.7 241.1 279.0 290.7 Operating expenses (217.8) (223.9) (131.7) (74.7) (81.4) (109.2) (91.8) EBITDA 57.5 51.7 82.6 131.0 159.6 169.8 199.0 Depreciation & amortisation (32.9) (40.3) (40.5) (44.2) (52.5) (57.3) (62.0) EBIT 24.6 11.3 42.2 86.8 107.1 112.5 137.0 Net interest & invt income (124.5) (110.1) (123.1) (120.0) (94.5) (93.5) (91.0) Associates' contribution ------Exceptional items (16.4) (12.5) 15.6 5.0 - - - Pretax profit (116.3) (111.2) (65.3) (28.3) 12.6 18.9 46.0 Tax 10.5 10.2 10.2 4.9 (7.1) (13.9) (14.3) Minority interests 4.2 4.3 (0.7) - - - - Net profit (101.6) (96.7) (55.8) (23.4) 5.6 5.0 31.7 Core net profit (95.7) (94.4) (81.6) (33.3) 12.6 18.9 46.0 SOURCES: CIMB, COMPANY REPORTS

14

Malaysia Airports Holdings│Malaysia April 10, 2015

Figure 13: ISG's core net profit (€m)

60 Title: ISG core net profit (€ m) Source: 40

20 Please fill in the values above to have them entered in your report

0

-20

-40

-60

-80

-100

-120 2011 2012 2013 2014 2015F 2016F 2017F

SOURCES: CIMB, COMPANY REPORTS

15

Malaysia Airports Holdings│Malaysia April 10, 2015

DISCLAIMER #01 This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. Unless otherwise specified, this report is based upon sources which CIMB considers to be reasonable. Such sources will, unless otherwise specified, for market data, be market data and prices available from the main stock exchange or market where the relevant security is listed, or, where appropriate, any other market. Information on the accounts and business of company(ies) will generally be based on published statements of the company(ies), information disseminated by regulatory information services, other publicly available information and information resulting from our research. Whilst every effort is made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable as of the date of the document in which they are contained and must not be construed as a representation that the matters referred to therein will occur. Past performance is not a reliable indicator of future performance. The value of investments may go down as well as up and those investing may, depending on the investments in question, lose more than the initial investment. No report shall constitute an offer or an invitation by or on behalf of CIMB or its affiliates to any person to buy or sell any investments. CIMB, its affiliates and related companies, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CIMB, its affiliates and its related companies do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report. CIMB or its affiliates may enter into an agreement with the company(ies) covered in this report relating to the production of research reports. CIMB may disclose the contents of this report to the company(ies) covered by it and may have amended the contents of this report following such disclosure. The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. CIMB prohibits the analyst(s) who prepared this research report from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request. Reports relating to a specific geographical area are produced by the corresponding CIMB entity as listed in the table below. The term “CIMB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case, CIMB Group Holdings Berhad ("CIMBGH") and its affiliates, subsidiaries and related companies.

Country CIMB Entity Regulated by Australia CIMB Securities (Australia) Limited Australian Securities & Investments Commission Hong Kong CIMB Securities Limited Securities and Futures Commission Hong Kong PT CIMB Securities Indonesia Financial Services Authority of Indonesia India CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI) Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia CIMB Research Pte. Ltd. Monetary Authority of Singapore South Korea CIMB Securities Limited, Korea Branch Financial Services Commission and Financial Supervisory Service Taiwan CIMB Securities Limited, Taiwan Branch Financial Supervisory Commission Thailand CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand

(i) As of April 9, 2015 CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report: (a) Malaysia Airports Holdings, Westports Holdings (ii) As of April 10, 2015, the analyst(s) who prepared this report, and the associate(s), has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report: (a) -

16

Malaysia Airports Holdings│Malaysia April 10, 2015

The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CIMB may or may not issue regular reports on the subject matter of this report at any frequency and may cease to do so or change the periodicity of reports at any time. CIMB is under no obligation to update this report in the event of a material change to the information contained in this report. This report does not purport to contain all the information that a prospective investor may require. CIMB or any of its affiliates does not make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Neither CIMB nor any of its affiliates nor its related persons shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CIMB and its affiliates’ clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments thereof. Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report. The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors. Australia: Despite anything in this report to the contrary, this research is provided in Australia by CIMB Securities (Australia) Limited (“CSAL”) (ABN 84 002 768 701, AFS Licence number 240 530). CSAL is a Market Participant of ASX Ltd, a Clearing Participant of ASX Clear Pty Ltd, a Settlement Participant of ASX Settlement Pty Ltd, and, a participant of Chi X Australia Pty Ltd. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth)) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. This research has been prepared without taking into account the objectives, financial situation or needs of the individual recipient. France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument. Hong Kong: This report is issued and distributed in Hong Kong by CIMB Securities Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at CIMB Securities Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CHK. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CHK. Unless permitted to do so by the securities laws of Hong Kong, no person may issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong). CIMB Securities Limited does not make a market on the securities mentioned in the report. India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (“CIMB India”) which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 and in accordance with the provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with SEBI as an Investment Adviser. The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates. Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (“CIMBI”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations. Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (“CIMB”). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the

17

Malaysia Airports Holdings│Malaysia April 10, 2015

basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. New Zealand: In New Zealand, this report is for distribution only to persons whose principal business is the investment of money or who, in the course of, and for the purposes of their business, habitually invest money pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB Research Pte Ltd (“CIMBR”). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR. As of April 9, 2015, CIMBR does not have a proprietary position in the recommended securities in this report. CIMB Securities Singapore Pte Ltd and/or CIMB Bank does not make a market on the securities mentioned in the report.

South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch ("CIMB Korea") which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial investment instruments and it is not intended as a solicitation for the purchase of any financial investment instrument. This publication is strictly confidential and is for private circulation only, and no part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB Korea. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS. CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker and issuer including offering of Derivative Warrants Underlying securities of the following securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions. AAV, ADVANC, AIT, AMATA, ANAN, AOT, AP, ASP, BANPU, BAY, BBL, BCH, BCP, BEC, BECL, BGH, BH, BIGC, BJC, BJCHI, BLAND, BMCL, BTS, CENTEL, CK, CPALL, CPF, CPN, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, GFPT, GLOBAL, GLOW, GUNKUL, HANA, HEMRAJ, HMPRO, ICHI, IFEC, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, KTIS, LH, LOXLEY, LPN, M, MAJOR, MC, MEGA, MINT, NOK, PS, PSL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, RML, ROBINS, SAMART, SAWAD, SCB, SCC, SCCC, SF, SGP, SIM, SIRI, SPALI, SPCG, SRICHA, STA, STEC, STPI, SVI, TCAP, THAI, THCOM, THREL, TICON, TISCO, TMB, TOP, TPIPL, TTA, TTCL, TTW, TUF, UV, VGI, TRUE. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.

Score Range: 90 - 100 80 - 89 70 - 79 Below 70 or No Survey Result Description: Excellent Very Good Good N/A

United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing

18

Malaysia Airports Holdings│Malaysia April 10, 2015

authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (“CIMB UK”). CIMB UK is authorised and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are persons falling within Article 49 (2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. CIMB Securities (USA) Inc does not make a market on the securities mentioned in the report. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. Distribution of stock ratings and investment banking clients for quarter ended on 31 March 2015 1420 companies under coverage for quarter ended on 31 March 2015 Rating Distribution (%) Investment Banking clients (%) Add 55.4% 6.6% Hold 31.3% 3.8% Reduce 13.2% 1.3% Spitzer Chart for stock being researched ( 2 year data ) Malaysia Airports Holdings (MAHB MK) Price Close

9.50 Recommendations & Target Price

9.00

6.50 6.50 7.56 8.90 7.73 7.45 7.55 7.55 9.50 9.80 9.35 8.07 7.50 7.20 7.22 8.50 6.60 8.00 7.50 7.00 6.50 6.00 5.50 5.00 Add Outperform Hold Neutral Reduce Underperform Trading Buy Trading sell Not Rated Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14

19

Malaysia Airports Holdings│Malaysia April 10, 2015

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014. AAV – Very Good, ADVANC – Very Good, AEONTS – not available, AMATA - Good, ANAN – Very Good, AOT – Very Good, AP - Good, ASK – Very Good, ASP – Very Good, BANPU – Very Good , BAY – Very Good , BBL – Very Good, BCH – not available, BCP - Excellent, BEAUTY – Good, BEC - Good, BECL – Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC – Good, BLA – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Good, CENTEL – Very Good, CHG – not available, CK – Very Good, CPALL – not available, CPF – Very Good, CPN - Excellent, DELTA - Very Good, DEMCO – Good, DTAC – Very Good, EA - Good, ECL – not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA - Excellent, HEMRAJ – Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Good, IVL - Excellent, JAS – not available, JUBILE – not available, KAMART – not available, KBANK - Excellent, KCE - Very Good, KGI – Good, KKP – Excellent, KTB - Excellent, KTC – Good, LH - Very Good, LPN – Very Good, M - not available, MAJOR - Good, MAKRO – Good, MBKET – Good, MC – Very Good, MCOT – Very Good, MEGA – Good, MINT - Excellent, OFM – Very Good, OISHI – Good, PS – Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH – Very Good, RATCH – Very Good, ROBINS – Very Good, RS – Very Good, SAMART - Excellent, SAPPE - not available, SAT – Excellent, SAWAD – not available, SC – Excellent, SCB - Excellent, SCBLIF – Good, SCC – Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA – Very Good, STEC - Good, SVI – Very Good, TASCO – Good, TCAP – Very Good, THAI – Very Good, THANI – Very Good, THCOM – Very Good, THRE – not available, THREL – Good, TICON – Good, TISCO - Excellent, TK – Very Good, TMB - Excellent, TOP - Excellent, TRUE – Very Good, TTW – Very Good, TUF - Good, VGI – Very Good, WORK – not available.

CIMB Recommendation Framework Stock Ratings Definition: Add The stock’s total return is expected to exceed 10% over the next 12 months. Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months. The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.

Sector Ratings Definition: Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation. Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

Country Ratings Definition: Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark. Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark. *Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, , Stock Exchange of Thailand, Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months. Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy: expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected negative total returns of 10% or more over the next 3 months.

20