PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) saw its shares gaining more than 7% or 58 sen to its highest point in six months at RM8.51 after a report said the Malaysian Aviation Commission (Mavcom) has proposed the introduction of a transfer passenger service charge (PSC).
“We gather that the transfer PSC is applicable to both domestic and international flights for transfer journeys, where a flight is scheduled to depart within 24 hours of arrival at the transfer airport,” a RHB Research report said.
It said that proposals from the Mavcom second consultation paper on the Aeronautical Charges Framework are overall positive for the company.
RHB Research has maintained its buy call on the counter and increased its discounted cash flow derived target price of RM9.20 from RM8.15, which represents a 16% upside with a 2% yield.
The research house said the proposed regulated weighted average cost of capital (WACC) of 10.88% is positive for MAHB.
“Although the proposed regulated WACC of 10.88% is lower than MAHB’s suggestion of 12.7%-14%, it is at the higher end of Mavcom’s initial range of 9%-11% in the first consultation paper,” it said.
“Note that the WACC represents the fair return on capital for the amount of capital expenditure that MAHB would spend – as such, the higher value is better for MAHB,” it added. RHB Research said that MAHB is undervalued at -1.4 standard deviation forward price to earnings ratio and -1.1 standard deviation price to book value.
It said that Mavcom’s proposal has removed a large amount of uncertainty for the regulated asset base (RAB) framework.
“We expect MAHB’s valuation to re-rate further. Recently, MAHB also delivered a positive earnings surprise for the first quarter of financial year 2019. We note that MAHB’s ongoing concerns have been factored into our target price, which conservatively implies -1.2 standard deviation versus its mean,” it said.
The research house said it has raised its target price on MAHB due to lower beta assumptions to reflect reduced uncertainty over the RAB framework.
It said risks to its call are weaker-than expected passenger traffic, negative outcomes from ongoing court cases with AirAsia Bhd and AirAsia X Bhd , and a sharp depreciation in the Turkish lira.