KUALA LUMPUR: RHB Research has maintained its Buy on MAHB with a target price of RM8.5, it said in a note on Tuesday.
RHB said that MAHB will state today whether it will exercise right of first refusal (ROFR) to block TAV Havalimanlari (TAV) from landing 40% of Sabiha Gokcen Airport (ISG) for EUR285mil from stakeholder Limak.
Limak had earlier said it would sell to TAV if MAHB does not exercise its ROFR. At that price, ISG is valued at EUR712.5mil, ie 12% lower than RHB's EUR808.87mil valuation.
Our valuation assumes ISG breaking even by 2016 and profitable by 2017 at EUR13mil.
"We think MAHB is not keen to partner TAV. Assuming it does not exercise its ROFR, we opine TAV still focusing on making Istanbul Ataturk Airport (Ataturk) Turkey’s primary hub despite owning a stake in ISG.
"In such a case, ISG’s role could be irrelevant until 2018 at the earliest, once Istanbul’s third airport opens with Ataturk closing operations.
"Should MAHB fail to block TAV’s attempt to buy the stake, this could create a valuation overhang on ISG, as losses may prolong. ISG has become more relevant recently given Ataturk’s congestion woes. Turkish Airlines and Qatar Airways have also started to land there," it noted.
It added that MAHB is restructuring ISG’s borrowings, potentially saving up to EUR8mil annually in financing costs.
"It would want to maintain its AAA debt rating and this could likely see MAHB going for a 100% share issuance, in our view, vs debt. Furthermore, an acquisition via 100% debt could stress earnings and cash flow as annual interest payments could be at least RM45mil," it said.
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