MIDF Research has maintained its current earnings estimates for MAHB.
PETALING JAYA: Analysts expect the new terms under the operating and land lease agreements (OAs) signed between Malaysia Airports Holdings Bhd
(MAHB) and the government to mildly lighten the airport operator’s capital expenditure (capex) burden, but will have no material impact on its earnings moving forward.
On Monday, MAHB signed the new OAs, which will see an extension of its concession to operate, manage, maintain and develop 39 airports and short take off and landing airports until Feb 11, 2069.
According to MIDF Research, the key investment highlights to the new OAs include the implementation of a capex recovery model, a three-year cycle revision for user fee percentage and the rollout of a passenger service charge (PSC) compensation plan.
MAHB could undertake the development capex, subject to the mutual agreement of the parties on a capex recovery model, which includes utilising the airport development fund (ADF), implementing project financing from the capital market, accessing funds provided by the government, or adopting any other bankable financing model.
Furthermore, the user fee percentage will undergo revision on a three-year basis.
Currently, MAHB pays approximately 13% of total revenue to the government, with an annual increase of 0.25%.
In accordance with the new OAs, 50% of the PSCs component considered in the user fee calculation will be directed to the ADF.
Meanwhile, the marginal cost support sum has also been substituted by an enhanced PSC compensation mechanism, the research house noted.
However, detailed information regarding this replacement has not been disclosed yet, said MIDF Research.
The research house also noted, “If the government undertakes a restructuring or reorganisation of the industry, MAHB and the government will collaboratively determine the revised agreed terms to be incorporated in the new OAs.”
Further details on the new OAs will also be revealed during a MAHB briefing session today.
MIDF Research, which has a “neutral” call on the stock, has maintained its current earnings estimates with an unchanged target price (TP) of RM8.75.
Kenanga Research in a report yesterday said the new OAs offered MAHB the “flexibility” to pursue strategic investments needed, including partnering with any external parties to improve capacity, facilities and infrastructure of the airports or any of the facilities subject to mutual agreement of the airport operator.
It noted the ADF establishment to receive contributions from airport users, the public and also airlines will help to fund future airport capex.
For illustration purposes, Kenanga Research said RM1bil in airport revenue will translate to a RM24mil contribution to the ADF.
“This is based on PSC revenue making up 40% of total airport revenue and a user fee rate of 12%. Only user fees on PSC revenue will be subject to contribution to the ADF and the proposal entails half of these to go into the fund,” the brokerage firm pointed out.
In anticipation that MAHB is expected to incur losses following the slow recovery for air travel post-pandemic, Kenanga Research expects the OAs will allow the airport operator to recover its losses in regulator period one (RP1) via a loss capitalisation mechanism or LCM starting from RP2.
The brokerage firm said: “We like MAHB as the dominant airport operator in Malaysia and one of the largest in Turkiye, as a good proxy to the recovery of air travel and tourism locally, regionally and globally and its strong shareholders who have demonstrated unwavering support through thick and thin (including during the pandemic and a massive cash call in 2014).”
The recently announced tariff revision is also positive to the airport operator’s earnings, but may not be sufficient for it to fund more aggressive capex plans, added Kenanga Research.
On the sector’s outlook, the research house expects business and leisure air travel to continue to recover throughout the financial year 2024 (FY24).
“According to our in-house projection, tourist arrivals in Malaysia are expected to jump 35% to 27 million (consistent with Tourism Malaysia’s projection to return to pre-pandemic levels) in FY24 from an estimated 20 million a year ago,” it noted.
“This should underpin growth in MAHB’s passenger throughput demand in 2024.
“We expect traffic trajectory to grow in subsequent months as airlines continue to re-activate more aircraft to match increasing demand,” it added.
