Analysts: MAHB should form partnerships with other bidders to buy Stansted airport


Success story: Kenanga Resear ch says MAHB has a track record of securing foreign airports through partnerships.

PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) stands a fair chance of winning Stansted airport provided it strikes the deal with one or more consortium partners, according to analysts.

Given the £1bil (RM4.92bil) offer against MAHB's modest cash pile, the analysts believe the most sensible route for MAHB into the London airport would be through a partnership riding on its extensive experience in airport management.

An analyst from Hwang DBS Vickers Research pointed out that MAHB's current cash flow has been strapped to its development of the KLIA Aeropolis.

With a net gearing of 54%, MAHB would not be able to take on the Stansted bid alone without raising its debt level to over 100%, which the group does not intend to do.

“I don't think they can win the bid without raising any funds. So logically, MAHB should do this in partnership, possibly with one or more of the existing bidders.” he told StarBiz

He added that MAHB could do a rights issue but in a smaller quantity as it had already placed out 10% of issued and paid-up share capital of RM1.1bil early this year.

Another analyst from Kenanga Research said that MAHB already had a record of securing such deals through partnerships.

“For example the Hyderabad International Airport in India and the Sabiha Gokcen International Airport in Istanbul, the airport operator has partnered Indian infrastructure company GMR Group to manage those successfully,” he said. He added that the bid for Stansted had surprised him as MAHB has recently raised RM4bil for the development of KLIA2.

“But if the opportunity is there, Stansted is worth looking at,” he said.

On Bursa Malaysia, MAHB closed at RM5.34, 14 sen lower, reflective of the market's performance. The counter has been going down gradually since the start of the month, with the month's highest at RM5.87 achieved on Nov 1.

As for MAHB's sudden inclusion in the running for London's third hub, the word has been that Heathrow was looking for a “stalking horse” to secure a better offer to buoy the eventual acquisition price higher.

However, it is learnt that Manchester Airport Group remained the favoured bidder.

Hwang DBS Vickers Research analyst agreed that Stansted's owner could be trying to raise the bid but did not believe that MAHB's role will be just a “stalking horse” as reported.

“I think this is more than a stalking horse offer. I think MAHB has genuine interest in the bidding,” he said.

He added that winning the bid should be beneficial for MAHB because Stansted is the third busiest airport in the London with 18 million passengers per annum.

“What more, the trend going forward for the airport management business is in low-cost carriers. Full-fledge airlines have been generally showing less growth,” he said, adding that the current Low-Cost Carrier Terminal has seen consistent double-digit growth in the past few years.

However, Ahmad Maghfur Usman of OSK Research was not supportive of the acquisition on grounds that airline operators might press for lower landing charges to MAHB's disadvantage, should Stansted choose to cut costs.

“With Ryanair being its key client, this does not give Stansted much bargaining power to maintain or lift airport charges,” he stated in his report.

Ryanair, a budget airline, dominates 70% of Stansted's passenger traffic.

Ahmad Maghfur also thought that the valuations were somewhat unattractive.

“Assuming a conservative 10% increase in earnings before interest, tax, depreciation and amoritisation (EBITDA) on the back of tighter cost control, the bidders are expected to fork out 10x to 11x EBITDA for Stansted, which is on the high side, since MAHB and Airports of Thailand command valuations of just seven times.

“Hence, there may be very little room for a higher price resulting from the bidding war.”

He admitted that while its valuation was on the high side, MAHB's success in managing airports may boost its chances of winning the bid.

Stansted airport has been forced-sold by airport group shareholder BAA after it lost a three-year battle with UK competition regulators barring its ownership of two airports. BAA also owns Heathrow airport.

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