KUALA LUMPUR: AffinHwang Research has maintained its Reduce on MAHB with a target price of RM6.20 and made no changed to the airport operator's earnings forecast.
MAHB has opted to exercise its right of first refusal on Istanbul Sabiha Gokcen Airport(ISGA).
"Assuming a full debt funding as well as consolidation of ISGA’s debt, this acquisition will raise MAHB’s gearing level to 1.22 times. This will compromise its AAA rating. As such, we believe a cash call is likely," it said on Friday.
AffinHwang said MAHB exercised its ROFR on ISGA MAHB via its wholly-owned subsidiary Malaysia Airport Cities announced that it has exercised its right of first refusal (ROFR) in relation to TAV Havalimanlari Holdings’ (TAV) offer to acquire the 40% stake in ISGA at €285m (c.RM1.2bil).
Post acquisition, MAHB will own 100% of ISGA.
Upon the acquisition, AffinHwang said MAHB will have to consolidate ISG’s debt (€420mil), as well as raise in €285mil funding (RM1.1bil).
"However, the funding details have not been finalised. Assuming full debt funding, ISGA’s debt consolidation as well as estimated acquisition related expenses of RM47mil, MAHB’s gross gearing level would increase to 1.22 times (higher than our earlier estimate of 1.18 times).
"Total debt level will increase to RM6.9bil (from RM3.8bil currently). The proposed acquisition is expected to complete in 1Q15," it said.
Given that MAHB has to comply with the debt covenant of a 1.25 times gross gearing ratio and a gross gearing ratio of one time to maintain its AAA rating, AffinHwang said funding will likely be done through a mix of bank borrowings and capital market transactions (private placement and/or rights issue).
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