Passenger volumes at MIA are booming, but its share price is not

Earlier this month, Malta International Airport plc (MIA) published its traffic results for September 2023, showing in excess of 800,000 passenger movements for the third consecutive month. The third quarter of the year is always the most important for the airport operator due to the seasonality of Malta’s tourism sector, generally accounting for over 30% of annual passenger movements.

During September, passenger movements amounted to 812,176, representing a growth of 6.5% from the comparable figure of 762,361 in September 2019, and 23.3% above the movements in the same month last year.

With over 800,000 passenger movements in each of the past three months, the total of 2.54 million during the third quarter of the year represents a growth of 6.7% over the comparable figure of 2.38 million in Q3, 2019.

Following the elevated number of passenger movements during the past three months and the importance of the Q3 figures to the annual figures of the airport operator, it is worth placing this in the context of the projections provided by the company so far this year.

It is highly likely that the airport operator will achieve a new record level of passenger movements

The latest guidance provided by MIA was on August 1, 2023, when they upgraded their 2023 forecast to 7.2 million passengers, which was just below the previous record of 7.31 million in 2019, and 14% higher than the 6.3 million original target set by MIA at the start of the 2023.

However, given the performance to date, with 5.97 million passenger movements during the first nine months of the year – which is 6% above the corresponding period in 2019 and 36% above the passenger traffic recorded in the same period last year – it is highly likely that the airport operator will surpass its August guidance by a considerable margin and achieve a new record level of passenger movements.

In fact, if one assumes a 5% growth above the passenger volumes of 1.67 million in Q4, 2019, this would translate into 1.75 million passengers in the final three months of the year, bringing the total to over 7.7 million.

Naturally, if this figure is achieved, the financial forecasts also published by the company on August 1, would also be surpassed. At the time, MIA had projected that its total revenue would reach a new record level of €113 million; EBITDA was expected to rise to €70 million and net profit for 2023 was forecast at €37 million.

In the coming weeks, MIA will also be publishing its financial performance for the first nine months of the year, in line with the strategy of a number of companies to provide quarterly financial information to the market. One cannot exclude that the company will again upgrade its passenger and financial guidance following the very strong performance during the past few months.

The boom in passenger figures being recorded is excellent news for the thousands of MIA shareholders, especially following the very challenging period during the pandemic when the company’s financial performance was naturally hit hard as passenger movements shrunk.

Earlier this year, the company restored dividends to shareholders with a distribution of €0.12 per share in respect of the 2022 financial year, matching the record interim and financial dividend of 2019. Moreover, last month, MIA also resumed its semi-annual dividend policy as it distributed an interim dividend of €0.03 per share to all shareholders.

If the company maintains its dividend payout ratio at 60%, similar to the distribution for the 2022 financial year, and in line with the policy of its parent company Flughafen Wien AG (Vienna Airport), MIA should distribute a total net dividend of €0.16 for the 2023 financial year, based on the August 2023 projected net profit of €37 million.

The profitability level could easily be exceeded in view of the stronger passenger movements registered more recently, which could also lead to a higher final dividend early next year.

Despite the boom in passenger volumes and the resultant positive impact on the company’s financial performance, unfortunately the share price has failed to respond accordingly. In fact, while one would have expected the share price to move higher in recent months once the company restored dividends and also upgraded its passenger and financial forecast for this year, on the contrary, the share price actually drifted lower to below €5.50 per share.

The share price of MIA’s parent company listed on the Austrian Stock Exchange, meanwhile, has performed remarkably well over recent months and has jumped to fresh record levels on a regular basis, thereby more than offsetting the sharp decline at the time of the pandemic.

Many investors in Maltese companies are continuously questioning the unresponsive nature across the local capital market, by citing MIA as a prime example. The pricing anomaly is truly evident to most investors who rightly question the effectiveness of the market pricing mechanism in Malta.

Although the economic environment has changed in a material manner over recent years, many observers correctly highlight that MIA’s share price in summer 2019 was firmly above €7 per share when passenger movements were rising to record levels of 7.3 million passengers. Meanwhile, there is ample evidence now that the company will surely exceed this passenger milestone, leading to an exceptionally strong financial performance for 2023.

Despite these very positive indicators, MIA’s share price remains firmly anchored at around €5.50, leading to a material disappointment among the investment community. I have yet to recall a time when investor sentiment across the Maltese capital market was at such a low level. Although many seasoned investors would rightly point out that the best time to enter the market is when sentiment is weak, it is also true that the very minimal trading activity and pricing anomalies across a number of companies is unfortunately alienating many investors towards Maltese companies.

Stakeholders need to act fast to instil a dose of much-needed confidence across the capital market.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, ‘Rizzo Farrugia’, 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 company/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. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia 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, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, 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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