MAHB eyes RM1b earnings and 10% ROE by 2014

  • Business
  • Friday, 02 Apr 2010

KUALA LUMPUR: MALAYSIA AIRPORTS HOLDINGS BHD (MAHB) aims to increase its earnings before interest, taxes, depreciation and amortisation (EBITDA) and return on equity to RM1bil and 10% respectively by 2014.

Managing director Tan Sri Bashir Ahmad Abdul Majid said its EBITDA in an optimistic case scenario was expected to grow to RM1.12bil while in a base case scenario it was estimated to be RM822mil.

For the financial year ended Dec 31, 2009, MAHB posted a net profit of RM140.2mil on revenue of RM476.6mil.

Bashir said the airport operator intended to increase its EBITDA by managing more airports overseas, boosting its commercial revenue, increasing passenger traffic at the KL International Airport (KLIA) and co-developing land.

“We are targeting to achieve 60 million passengers by 2014, with focus on strengthening KLIA as the next generation hub.

“However, if the recovery as seen over the past few months continues, we may surpass the 60 million target. We are monitoring the growth and this forecast will be reviewed from time to time,” he said at the launch of MAHB’s five-year business direction by Deputy Finance Minister Datuk Dr Awang Adek Hussein, who represented Second Finance Minister Datuk Seri Ahmad Husni Muhamad Hanadzlah.

Under its business plan, MAHB outlined three core areas in its business direction objectives to drive future business growth – traffic growth, service excellence and commercial development.

Bashir said the current expectation was that traffic at Malaysia’s airports would pick up again in 2010 due to economic growth and liberalisation.

Last year, MAHB handled 51 million passengers. This year, the airport operator expects to handle some 53 million passengers.

Bashir said the liberalisation of intra-Asean air services agreements and airline route expansion was expected to further change the industry landscape.

“As an indication of things to come, we have already started to see an increase in flights from regional airports to regional destinations in other countries as well as growth of low-cost airlines in the region,” he added.

MAHB has also projected its revenue to touch RM3bil by the end of the five-year plan.

“If we stretch ourselves to bring in passengers, we can be a RM3bil company in five years,” Bashir said, adding that several key initiatives had been identified, of which 93% would be from commercial sources – aeronautical and commercial revenue.

On its commercial development, he said MAHB would focus on commercial and retail optimisation and expansion at KLIA’s new terminal and subsequently venture into land development in two to five years.

Bashir said the group was interested in developing the huge tract of land next to its airport. “We’re an expert in managing airports but may not be an expert in developing land. We may need to find a partner to develop the land,” he added.

To a question, he said no decision had yet been made on its land development project. “It may not be one partner. It could be more than one partner.”

MAHB has also identified a huge commercial opportunity at KLIA’s new terminal for low-cost carriers. It intends to integrate design to deliver value to passengers – shopping, catering, car parking, business services and advertising.

Bashir expects total till sales per passenger to increase three-fold between 2008 and 2014. KLIA sales per passenger in 2008 was RM36.44 with a forecast of RM50 per passenger in 2014.

Meanwhile, Bashir said MAHB was “quite comfortable” handling a few more overseas airports. It currently operates five international airports and 16 domestic airports in Malaysia and has invested in two airports in India and one in Turkey.

“We are looking at managing two more airports in Asia. Hopefully we can secure them by year-end,” he said.

MAHB will also continue to emphasise on service excellence and would focus on the staff to ensure they deliver service standards of the highest quality.

Bashir said with the aspiration to build a “world-class airport business”, MAHB had to be creative and innovative in maximising revenue from non-aeronautical activities.

“This will allow us to minimise increments in aeronautical charges and offer the best value in the region to airlines operating out of our airports. Non-aeronautical revenue grew by 66% in the past five years and contributed 57% of our total revenue as at 2008,” he said.

“We cannot be average. We have to strive for excellence,” he said.

Analysts contacted generally believed MAHB’s business plan was achievable, with focus and strategies to sustain earnings by going into land development.

However, an analyst said having a business direction was essentially good but he preferred to wait for more indications.

“Quite likely MAHB can achieve the target based on its retail optimisation programme. It has made some success,” OSK Research analyst Ng Sem Guan said.

However, he was concerned about the 50% discount incentive on landing charges given to airlines which expires next April. He said it would be a double whammy for airlines if MAHB decided to increase its passenger service charge then.

On MAHB’s proposed land development, Ng said there was good prospect for this venture but its success would depend on the implementation. He reckoned that MAHB could develop warehouses and other commercial properties its huge landbank.

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