New operating agreement boost for MAHB

Optimistic view: Airport operator MAHB’s new operating agreement with the government will pave the way for its stock to be rerated, says CGS-CIMB.

PETALING JAYA: The new operating agreement (OA) between Malaysian Airports Holdings Bhd (MAHB) and the government could be an impetus for a re-rating catalyst for the airport operator.

The agreement is yet to be signed, but CGS-CIMB in a report said it will pave the way for the stock to be rerated.

It believes the new OA will be investor-friendly, and create the sustainable long-term development of MAHB, which has been hit by the Covid-19 pandemic in terms of passenger traffic growth both in Malaysia and Turkey.

It said the MAHB management highlighted that MAHB insisted on a 90-day credit period for the rental of premises instead of rebates at the airport as well as landing and parking charges.

“With renewed optimism in the yet-to-be-signed OA, we raise our target price from RM6.30 to RM6.86 a share, ’’ it said.

This is based on a higher price-to-earnings ratio multiple from 22 times to 24 times of the financial year 2021 (FY21) earnings per share (EPS), led by renewed optimism for air travel.

Although the availability of vaccines has renewed the optimism for air travel to return to normal sooner than expected, the research house only expects air travel to improve at a gradual pace starting from 2021, with pent-up demand in the second half of the year.

In terms of profitability, it is expecting airlines including AirAsia Group Bhd to continue facing tougher operating conditions.

This is at least in the first half of the year until the widespread availability of vaccines, as there could be sporadic resurgence of Covid-19 infections.

“Faced with losses on the collapse in passenger loads and cash-flow challenges, AirAsia is in need to raise capital, ’’ it added.

The report said AirAsia Malaysia operated at 52% of its domestic capacity in September, in comparison to 40% in July 2020 as travel demand has been on an upward trajectory since second-quarter 2020 with the easing of restrictions on interstate travel.

While operating capacity was again reduced in October 2020 given the conditional movement control order, AirAsia Malaysia was striving to recover to 60% of its pre-pandemic domestic capacity by fourth-quarter 2020

The research house has maintained an “underperform’’ call on AirAsia with a target price of RM0.38 based on an unchanged 0.5 times FY21 book value per share.