MAHB — de-list of questions

All MAHB needs — like with the other “improvements” — is good management, board commitment and capital resources. — ART CHEN/The Star

MALAYSIAN-born Tan Hock Eng is now big news. The Broadcom Inc CEO, now a US citizen, is the highest paid CEO in the world, having raked in RM763mil (US$162mil) in 2023.

That’s more than RM2mil a day — likely making more money than all CEOs of KLCI-linked companies combined.

The huge earnings show us a few things, especially about how well CEOs in the US are paid. No other country can compare against the annual compensation CEOs in the world’s largest economy make.

Secondly, it is also a reflection of how a CEO in the US is remunerated based on just how well the stock and the company is performing. The bottom line is what matters most for the company and shareholders, because it manifests itself through a company’s share price.

Having proper management is key for all companies, especially public-listed companies, where a CEO’s acumen is crucial to the well-being of a company.

But it doesn’t always happen that way. Just take what is happening with Malaysia Airports Holdings Bhd (MAHB).

MAHB’s share price is going in the opposite direction of the airport’s operations. As its shares flirt with an all-time high, Kuala Lumpur International Airport (KLIA), once ranked among the world’s best, is now in the basement of some rankings. The only way, it seems, is up.

Which has observers wondering just what is happening with its privatisation move. Such privatisation would normally indicate there is more upside for the stock. Whoever takes it private can then expect good returns.

The consortium has released a statement saying that the operations of KLIA will get fixed by privatising the company but the truth is far from that. All it needs is management and board commitment to get it done, not by changing the shareholding status of a company.

The statement lists the areas that needs fixing — the aerotrain and baggage handling system, passenger experience by alleviating congestion, improving passenger flows and terminal ambience, and expanding the retail and food and beverage offering at MAHB’s airports.

It also lists that MAHB will be able to work closely to support existing airlines and attract new airline customers to MAHB’s airports, and maintain the highest level of safety for passengers and employees.

Again the management and board can fix these issues, without changing the listing status.

Proponents of the privatisation exercise go on to say that by taking MAHB private, the owners will be able to accelerate capital investment to repair and maintain the existing infrastructure and equipment.

That would be good if there is a commitment by the new shareholders to push that through. However, external capital can also be raised if MAHB remains a listed company simply by having the ability to issue new shares to fund such activities.

It also says that by being in private hands, it will be able to upgrade and harmonise operational service standards across MAHB’s state airports, plan long-term investment to grow capacity throughout it network of airports in Malaysia and Türkiye, and partner with state bodies and local businesses to develop ancillary businesses around the airports.

Again, all of that can be done right as a listed company. All MAHB needs — like with the other “improvements” — is good management, board commitment and capital resources.

All the points raised above will improve the fortunes of MAHB. If that happens, the consortium that takes MAHB private will reap the financial rewards instead of sharing it with the broader market.

This may just happen as there is a consortium member that will be counted on more to deliver the operational results. The track record of Global Infrastructure Partners (GIP) shows what it has been able to do with various airports it owned throughout the world.

According to a presentation slide, GIP managed to get more flights to call at Gatwick in the UK, which in turn raised the profitability of the airport. Improvements to the shuttle and baggage handling were done and it managed to get more people moving through security dramatically over the years. Higher passenger movement and profit were also achieved by GIP at Edinburgh and London City airport.

The privatisation of MAHB would, however, remove a quality stock from Bursa Malaysia.

The question though is for how long. From previous examples of privatisations, the idea was to eventually relist these companies after a period of improvement. Maybe the airports will one day be listed sans the foreign airport it controls.

Khazanah Nasional Bhd had plans to relist Malaysia Airlines after a number of years by improving on its operations and financials. Maybe the consortium members will have a different outcome for MAHB.

Khazanah, through unit UEM Group and the Employees Provident Fund, privatised highway operator PLUS Malaysia Bhd. The returns have been a windfall for both parties.

In that case, it is understandable why it remains in private hands.

This article first appeared in Star Biz7 weekly edition.

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