Malta International Airport plc (MIA) recently issued its annual results, whereby it reported record results across the board. Revenues increased from €73.1m in 2016 to €82.4m in 2017, with the Airport segment providing the bulk of the increase, increasing by 14.6% or €7.5m year-on-year on the back of an increase in passenger movements from 5.1 million in 2016 to 6.0 million in 2017.

The Retail and Property segment also reported a strong increase of 8.3%, with revenues increasing by €1.8m to €23.0m. MIA improved its EBIT margin to 50.2% from 45.7% in 2016, and, excluding the €2.8m early repayment fee on one of its loans, delivered a normalised profit after tax of €26.0m in 2017 compared to €21.0m in 2016, or a net earnings growth of 23.7%, which is remarkable.

Management forecasts a growth in passenger movements to 6.5 million for 2018, supported by aggressive growth strategies by both Ryanair and Air Malta, who are adding an additional aircraft with Malta as its base, as well as more routes and higher frequencies provided by other airlines.

The outlook for the sector is further supported by the current government who is investing heavily in the tourism sector and foreign trade, which is reaping its rewards in terms of attracting commerce and activity to the Maltese islands. Real GDP growth of 6.9% in 2017 and 5.6% forecasted in 2018 (Eurostat) illustrates the current economic boom which is also enabling local passengers to be able to travel more frequently, be it for work or leisure.

The current management has done an excellent job till now of harnessing these growth opportunities by having the vision to improve the infrastructure, in order to maintain and improve the airport’s capacity, as well as it standards as one of the “best in class”. The company has or is looking to improve the capacity and efficiency in all aspects of the airport’s operations, including the weather systems, baggage handling systems and the number of check-in desks.

Recently, it has announced its’ ambitious master plan and was approved to expand the airport’s operations even further via an investment of around €100 million. Towards the end of the year, it will be developing a much needed multi-storey carpark to cater for much sought after parking spaces.

Subsequent to its completion, the company is set to embark on a Terminal Expansion Project, where MIA is currently in discussions with a leading British design firm which has been tasked with developing the building further in order to equip it with additional capacity. The designs, cost and estimated timelines are expected to be presented to MIA by the end of 2018. Furthermore, MIA is subsequently looking to develop Skyparks II which is set to create an additional 27,100 sqm of office space, retail space as well as a business hotel.

Current management has inexplicably been reluctant to use debt to finance (at least in part) its capital expenditures.

Given the current low cost of access to debt finance, as well as the tax shield provided by debt, it would be more optimal for MIA to increase its debt via the capital markets or otherwise, and in my opinion shareholders should be more vocal with the company in this respect in order to deliver the best returns to equity holders.

Congruent to the above, MIA’s share price has largely reflected these positive results and potential, with the share price increasing to a high of €5.00 in mid-January, before stabilising at the €4.94 more recently compared to a trading range of €4.10- €4.25 a year ago or circa 16-20% in capital gains and a net dividend

of €0.10 per share. Shareholders would most definitely have little to complain about in this respect, but where do we go from here?

In my opinion, shareholders should comfortably hold onto the shares at the present time as the wind appears to be in MIA’s sails, in terms of earnings growth. 2018 is already looking even more promising than anticipated with January passenger movements increasing 16.7% year-on-year, and February registering an 18% increase, placing them firmly on course to meet and possibly exceed expectations.

Once the scheduled projects reach their completion, we would expect a significant upswing in dividend distribution, as the free cashflow made available via the reduced capital expenditure, as well as the earnings growth registered via the new investment is expected to reward shareholders handsomely.

This article was issued by Simon Psaila, Financial Analyst at Calamatta Cuschieri. For more information visit, The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as a personal recommendation/ investment advice including tax and legal advice. Analyst views to BUY, SELL or HOLD on particular stocks or instruments are related to the stock/instrument being reviewed and are not to be treated as personal recommendations to investors, which are only issued following suitability assessment.


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