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Tuesday January 22, 2013

Analysts say RM7.5bil Stansted Airport overpriced for MAHB and YTL

Manchester Group Airports won the bid for Stansted for a whopping £1.5 bil, £50 0mil
more than what the Malaysian consortium offered. Manchester Group Airports won the bid for Stansted for a whopping £1.5 bil, £50 0mil more than what the Malaysian consortium offered.

PETALING JAYA: The Malaysian attempt at wresting ownership of Stansted Airport, London's third largest airport, has ended after a UK concern outbid the offer by YTL Corp Bhd and Malaysia Airports Holdings Bhd (MAHB).

But the result has given analysts covering MAHB a sigh of relief.

“We are not disappointed as the winning bid of £1.5bil (RM7.5bil) is overpriced in our view and would have severely diluted existing earnings,” Maybank IB Research analysts said.

“MAHB definitely fits in as an experienced airport operator and we would not be surprised if it gets invited to participate in any upcoming offer for sale,” the Maybank analysts said.

Manchester Group Airports won the bid for Stansted for a whopping £1.5bil, £500mil more than what the Malaysian consortium offered.

Earlier last week, StarBiz reported that YTL and MAHB (in a 80:20 equity structure) were putting together a joint bid to acquire Stansted. Other interested bidders included seasoned airport investors such as Macquarie Group and Manchester Airports with Australian partner Industry Funds Management (IFM).

As part of the deal, IFM will invest in Manchester Airports with new equity as well as take a 35.5% stake in the enlarged group.

Hwang-DBS Vickers Research analysts said Manchester Group's win was not surprising considering it was the favourite of the bidders.

“MAHB's balance sheet could not have taken that kind of size for the deal,” an analyst said in reference to MAHB's supposed portion of RM1bil.

Losing the bid to owning Stansted would allow MAHB to concentrate on KLIA2, which is expected to be completed in May 2013.

KLIA2 is set to open on June 28, 2013, the same date KLIA opened 15 years ago.

However, analysts opine the new terminal will be under-utilised this year as AirAsia currently has a capacity of 20 million passengers while KLIA2 will be able to accommodate 45 million passengers.

With the price tag of £1.5bil, Maybank analysts said Stansted trades at 16.5 times enterprise value per earnings before interest, tax, depreciation and amortisation (EV/EBITDA) and price-to-book-value (PB) of 1.55 times.

This is against MAHB's current EV/EBITDA of 5.7 times and PB of 1.54 times. “We are comforted by the fact that YTL-MAHB have bid responsibly and prudently,” analysts said.

Meanwhile, analysts expect MAHB's fourth quarter ended Dec 31, 2012 results to come off better, compared to the third quarter on the back of higher traffic flows and utilisation rates during the period.

“We expect its financial year 2012 earnings to record a small on-year gain of 2.8% to RM411mil. The reversal of losses of shares from associates and hike in PSC (passenger service charges) rate are likely to be the main contributing factors for the increase in earnings,” MIDF Research analyst said in a report.

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