RHB Research retains Buy on MAHB, TP RM9

  • Analyst Reports
  • Friday, 01 Nov 2019

MavCom estimates more than 20 million passengers in Malaysia will enjoy a lower PSC following the introduction of the RAB framework.

KUALA LUMPUR: RHB Research is retaining its Buy call on MALAYSIA AIRPORTS HOLDINGS BHD (MAHB) with sum-of-parts derived target price of RM9, an upside of 14% compared with the last traded price of RM7.92.

It said on Friday this included a 2% FY20F yield, implying 25.3 times FY20F P/E, or -0.52 standard deviation from its average two-year forward price-to-earnings.

RHB Research said it attended a meeting organised by the Malaysian Aviation Commission (MAVCOM), and gather that the WACC for the Regulatory Asset Base (RAB) framework for 2020-2022 is still maintained at 10.88% with capex reduced to RM3.99bil from RM5bil.

An average price cap of RM43.50 was proposed for 2020-2022 -- higher than the previously proposed RM42.90.

“This is positive news, as it has reduced the uncertainty that WACC may decline in the Final Paper, ” it said.

The capex was reduced to RM3.99bil (20%) compared to RM5bil proposed in the Second Consultation Paper published earlier on June 18.

RHB Research said MAVCOM’s final decision was lowered due to a revision of the project timelines and estimated costs.

The biggest amount of capex will be for Kuala Lumpur’sinternational airports (both Kuala Lumpur International Airport and klia2) at RM2.7bil, followed by Penang International Airport at RM740mil.

Average price cap of RM43.50 proposed for the first regulatory period or RP1 is slightly higher than the RM42.90 proposed earlier in June’s consultation paper.

The amount for 2020-2022 will be RM43.10, RM43, and RM44.30.

There will be five tiers for airports in Malaysia. The final amount for each tier should be finalised at a later stage.

“We keep our call andTP pending the final amount for each tierand maintain our FY19F-21F earnings.

“The sell-down has lowered the valuation to 22.3 times FY20F P/E, or -0.97SD, which means that most of the negatives have already been priced in. We believe the news is positive, as it has reduced the risk that WACC will be lowered.

“Risks to our call and TP include weaker passenger traffic, unfavourable outcome of the RAB framework, negative outcome from ongoing court cases, , ” it said.

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