The recent business daily report on Malaysia Airports Holdings Bhd (MAHB) could be slightly negative but RHB Investment Bank Bhd (RHB IB) said it expects minimal-to-no-impact to the group’s earnings.
“While resolving aeronautical charges is crucial, MAHB’s potential extends beyond that. We think the ongoing resurgence in commercial rentals, tourism upswing, and potential operations from regulatory changes represent under-appreciated catalysts – yet to be fully assimilated,” it said.
Therefore, in its Company Update today (Dec 20), the research house keeps its BUY call and RM8.66 TP, 16% upside.
“With excitement abundant, MAHB is also attractively valued – our TP (6% ESG discount) implies 6.9x FY24F EV/EBITDA and trails behind its own and regional peers’ pre-COVID-19 means of 11.3x and 19.7x.”
RHB IB said MAHB is behind, but not out of the race.
“The key elements of the new operating agreement (OA) – that encompasses development capex, expansion planning, and benchmark passenger service charge (PSC) rates – remain undecided.
“The Malaysian Aviation Commission’s (MAVCOM) third and final consultation paper is still pending with regards to aeronautical charges, includin actual PSC rates and parking and landing charges over 2024-2026 or Regulator Period (RP) 1, and the long-term regulatory framework for RP2.
“As reported by business daily, the delays may stem from disagreements over standardising the passenger service charges (PSCs) between Kuala Lumpur International Airport’s Terminals 1 and 2 (KLIA’a T1 and T2).
“Regardless, both are frameworks are slated for conclusion by Feb 2024 at the latest, according to the daily and MAHB,” it said.
Besides that, the upcoming OA 2023 awaits official announcement, but the business daily mentioned reported a few potential updates.
“Unsurprisingly, PSC revisions dominate the discussion. Domestic PSCs surprisingly remain unchanged while international PSCs will rise as expected.
“(Additionally), KLIA T1’s international PSCs will likely remain higher than T2’s, and the new OA may also see the potential elimination of the marginal cost of support charges PSC mechanism,” it said.
The current OA offers MAHB a compensation mechanism, with government compensation any shortfall between the actual PSCs, which was gazetted by MAVCOM and the benchmark PSCs, which is set by the government.
The research house said MAHB’s potentials eclipse the downside risks, which include further delays in the commencement of the regulatory frameworks and lower-than-expected passenger volumes, PSCs, as well as parking and landing charges.
“While we regard China as the present key laggard, the visa-free facility for citizens from the former and India should serve as a compelling catalyst in 2024, stimulating Malaysia’s international tourism numbers.
“According to our sensitivity analysis, a 10% decrease in Malaysia’s international passenger volumes would results in 7%, 19.6%, and 6% drops to our FY24F EBITDA, core PATAMI, and TP.
“Pending conclusive information, we conducted a scenario analysis to anticipate potential outcomes. Our bear case scenario presents a minimal downside risk, less than 1% impact to FY24F EBITDA, core PATAMI, and TP while our bullish scenario suggests a rewarding upside.
“We also have yet to factor in the proposed increment of parking & landing charges, which will be unveiled in the upcoming third paper.”
