A report on the possibility of Malaysian Airport Holdings Berhad being taken private by its major shareholders before a stake sale to private equity firm Global Infrastructure Partners is deemed unconvincing says Kenanga.
This is in particularly due to the absence of an indicative offer price, the house maintains its forecasts, TP of
RM9.00 and MARKET PERFORM call.
According to a business weekly, it cited sources that a plan is being hatched by a few substantial shareholders of AIRPORT to take it private. Specifically, it is understood that both sovereign wealth fund Khazanah Nasional Bhd and Employees Provident Fund (EPF) which owns 33.2% and 7% stake in AIRPORT, respectively, are expected to be instrumental in the privatisation. Thereafter, a 30% stake in AIRPORT will be sold to GIP, an infrastructure investment fund involved in equity and selected debt investments. This could be probably due to AIRPORT’s shares not liquid enough for GIP to acquire a substantial stake in the former over a reasonable time frame. Key notable infrastructure assets of which GIP has equity stakes in are namely London Gatwick, Edinburgh Airport Limited and London City Airport.
Nevertheless, the plan to have an external party to manage AIRPORT is not new. Back in Aug 2001, Ministry of Finance signed a memorandum of understanding with Schiphol on to allow the latter to acquire a strategic investment in AIRPORT. However, the deal was aborted.
Kenanga said it does not find the story convincing given the lack of details, particularly the absence of an indicative offer price. For illustration purposes, it said assuming the AIRPORT privatisation is at RM10/share, the PER valuation works out to 25x and 18x its FY25F EPS and FY25 consensus EPS, respectively. This implies a discount of 26-47% compared to closest listed peer Airport of Thailand which trades at 34x FY25 consensus EPS. We believe the PER valuation discount to closest listed peer i.e. Airport of Thailand makes sense considering that Thailand’s tourism revenue is 3x larger than Malaysia’s. Note that based n FY25F PER of 24x, AIRPORT trades at discount to pre-Covid 3-year average historical 1-yr forward PER of 35x.
Outlook. The house expects business and leisure air travel to continue to recover throughout FY24. According to Kenanga’s in-house projection, tourist arrivals in Malaysia are expected to jump 35% to 27m (consistent with Tourism Malaysia’s projection to return to pre-pandemic levels) in FY24 from an estimated 20m a year ago (see Exhibit 2). A key driver is Chinese tourists that had historically contributed to an estimated 12% of total tourist arrivals in Malaysia. Furthermore, tourist arrivals is expected to be boosted by the 30-day visa-free regime for Chinese and Indian visitors to Malaysia starting from Dec 2023, and China allowing Malaysian inbound visitors 15 visa-free days between 1 Dec 2023 and 30 Nov 2024. This should underpin growth in AIRPORT’s passenger throughput demand in
The house expects traffic trajectory to grow in subsequent months as airlines continue to re-activate more aircrafts to match increasing demand.
