MIA registers profitability growth despite 6% decline in passengers

The financial statements published by Malta International Airport plc last week reveal that the company managed to achieve a 3.3 per cent increase in profitability despite a six per cent decline in passenger movements. This is a significant feat, given that MIA is greatly dependent on passenger and aircraft movements, and shows the importance of the recent investment made by MIA in the air terminal extension. The increased contribution from this investment was instrumental for the company to achieve profitability growth in 2009.

Overall revenue increased by three per cent to €46.5 million with aviation income (derived from the passenger service charge, aircraft landing fees, security fees and aircraft parking fees) declining by €0.84 million while non-aviation revenue grew by 20 per cent (€2.06 million). This surge in non-aviation income is attributable to a €0.8 million increase in concession income following the increased rentable area as part of the air terminal extension; a rise of €0.62 million in rental income from lease of land dedicated to aircraft maintenance facilities; car park fees increasing by 88 per cent (€0.56 million); and a 23 per cent increase (€0.13 million) in income from the new airport lounge.

Another important announcement made by MIA last week was the upward revision of its 2010 passenger forecast. This has been increased to a six per cent growth following the initial forecast of 2.8 per cent at the start of the year. The increase in the 2010 passenger forecast follows the recent announcement of six additional routes by Ryanair as part of the five-year agreement with the government of Malta to base an aircraft at MIA. Ryanair's commercial manager stated that the additional routes being launched during the current year should result in a substantial increase in passenger movements by the low-cost carrier. In fact Ryanair is aiming to register a total of 800,000 passengers in 2011, representing an increase of 355,000 over the actual number of passengers carried in 2009.

Although MIA warned that the six per cent forecast should be viewed with caution, given the volatile nature of the industry, the passenger movements during the first two months of 2010 already point to an improved outlook with a growth of 6.7 per cent. The increase in passengers will undoubtedly positively impact MIA's overall revenue in 2010 and beyond. Moreover, the airport operator also claimed that non-aviation revenues will increase in 2010 but not at the same rate of growth of 20 per cent as that seen in 2009.

Apart from an expected increasing in revenue in 2010, MIA also highlighted in the 2009 financial statements that the recent utility rate hike by the government of Malta will translate into an increased cost of circa €1 million. Moreover MIA has committed to increasing its marketing efforts to attract more traffic to Malta through the Malta Tourism Authority, as well as directly to airlines as part of the incentive scheme. Staff costs at MIA were relatively unchanged in 2009, but a new collective agreement which should soon be signed will result in additional costs in 2010 and beyond. Despite these higher costs, MIA was right to point out that the regulated fees it charges to passengers and aircraft (established by the Airport Charges & Regulatory Board) will remain unchanged for the fourth consecutive year.

The decrease in interest rates in 2008 and the early part of 2009 was of great benefit to MIA as the cost to finance its banking facilities declined by almost €0.6 million to €1.75 million. With interest rates expected to remain low throughout most of 2010, this should continue to help the company's bottom line.

MIA recommended an unchanged final gross dividend of €0.0897 per share to those members on the share register as at April 6, 2010 (this includes trades up to and including March 29). Following the interim dividend of €0.09231 per share paid in September 2009, the total gross dividend for the year of €0.18 per share translates into a gross dividend yield of 5.5 per cent based on the current share price of €3.26. MIA remains one of the highest dividend payers on the local stock market. The company paying the highest dividend is Maltapost with a yield currently at 7.8 per cent per annum, followed by Plaza (7.4 per cent), Go (6.8 per cent), and BoV (6.1 per cent).

During the annual general meeting to be held on May 10, shareholders will also be requested to approve a change in the share capital of the company. MIA is proposing to redenominate the nominal value of the shares from a value of €0.465874 per share to €0.50 per share through the capitalisation of €2.3 million from retained earnings. Following this redenomination, the company is also recommending that the issued share capital is converted from a total of 67,650,000 ordinary shares of €0.50 each to 135,300,000 ordinary shares of €0.25 each through a two-for-one share split on June 1.

The share split is the first since the company was listed on the MSE in November 2002, and aims to increase liquidity in the equity through a larger number of shares in the hands of the public. Overall trading activity this year has been rather encouraging with €9.2 million worth of trades transacted in the equity market. While BoV and HSBC together accounted for almost €5.5 million of activity on the Malta Stock Exchange (60 per cent), volumes in MIA amounted to €0.5 million (5.3 per cent) as 175,000 shares traded since the start of the year - significantly higher than the activity in the first three months of 2009.

MIA has outperformed the MSE Share Index so far in 2010 with a share price rise of 35.8 per cent compared to an overall increase of 4.2 per cent for the local equity market. After dropping to a low of €2 in May 2009 and stabilising at the €2.40 level towards the end of 2009, the surge in MIA's share price above the €3 level occurred after the announcement of the company's 2.8 per cent passenger growth forecast for 2010 (which has since been revised up to six per cent), as well as the planning approval of the business centre.

This new commercial development is part of MIA's strategy of further increasing the contribution of non-aviation revenue which was so evidently instrumental in the past 12 months. The €16 million business centre is expected to be completed by the final quarter of 2011 and MIA is expected to benefit from increased rental income from 2012 onwards.

Mr Rizzo is director of Rizzo, Farrugia & Co. (Stockbrokers) Ltd.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, RFC, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

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