Analysts advise investors to cash in on RM11/share MAHB offer

KUALA LUMPUR: Analysts are recommending that investors accept an RM11 a share offer for their stakes in Malaysia Airports Holdings Bhd (MAHB) as a consortium attempts to take the airports operator private.

The offer represents a 5.77% premium to the last closing price of RM10.40, which was just four sen off MAHB's historical closing high of RM10.44 set earlier this week.

Yesterday, a consortium led by MAHB's largest shareholders - Khazanah Nasional Bhd and the EPF - announced it was making a pre-conditional voluntary takeover offer to take the Malaysian airports operator private.

Called the Gateway Development Alliance Sdn Bhd, other members of the consortium include a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) and funds managed by Global Infrastructure Partners (GIP).

Under the terms of the proposal, the consortium will purchase all remaining 1.12 billion MAHB shares it does not currently own, representing 58.77% stake, for RM11 per share.

The consortium does not intend to maintain the listing status of MAHB upon completion of the offer, which it estimates to occur in the fourth quarter of the year.

Hong Leong Investment Bank (HLIB) Research said MAHB has strong upside potential to its current target price of RM10.25.

However, it noted a potentially long gestation period before shareholders can realise and extract value.

"Hence, we advise shareholders wishing to cash in their current investments in MAHB to accept the offer of RM11," it said in a company update.

In its review of the airports operator, HLIB noted that MAHB has reported strong passenger travel recovery in 1Q24 since Malaysia's border reopening in April 2023.

It said it expects Malaysia's operations to continue enjoying strong air travel demand growth post-pandemic while the recent extension of visa-free travel to China will ensure continued recovery in China traffic demand.

In Turkey, HLIB said the Istanbul Sabiha Gökçen International Airport (ISGA) has registered a profit since 2023, with expectations for continued traffic growth and strong earnings and cash flow in the coming years.

Initiatives of note include KLIA Aeropolis, the Subang Airport Regeneration Plan, the development of Penang International Airport and potentially, Kota Kinabalu International Airport, as well as the possibility of MAHB realising its investment in ISGA.

Meanwhile, MIDF Research said it expects MAHB to incur substantial capital expenditure in the coming years for airport expansion and development.

"This would potentially lead to a delay in earnings realisation especially given the uncertainties surrouding the regulatory landscape," it said.

With a discounted cash flow-derived fair value for MAHB at RM8.75, MIDF recommended investors accept the buyout offer in its latest update.

Kenanga Research advised investors to "accept offer" and rationalised its target price of RM9 to the offer price of RM11.

It said the offer price of RM11 a share translates to 26x and 20x of its FY25 forecast earnings per share (EPS) and FY25 consensus EPS respectively.

"This implies a discount of 26%-42% compared to closest listed peer Airport of Thailand, which trades at 35x consensus FY25F EPS.

"We believe the price-earnings ratio (PER) valuation discount to its closest listed peer, Airport of Thailand, makes sense considering that Thailand’s tourism revenue is three times larger than Malaysia’s," it said in a note.

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