MAHB solid results give buffer against regulatory uncertainty
KUALA LUMPUR: Malaysia Airports Holdings Bhd’s (MAHB) solid operating results for last year has improved its financial position, giving it additional flexibility to manage the uncertainty arising from the new regulatory framework being considered by the Malaysian Aviation Commission (Mavcom).
Moody’s Investors Service Singapore Pte Ltd project and infrastructure finance vice-president Spencer Ng said passenger traffic grew strongly in its Malaysian airports and whollyowned Sabiha Gokcen International Airport (SGIA) in Istanbul, Turkey, leading to a 9.3 per cent increase in aeronautical revenue.
“Its non-aeronautical revenue, mainly composed of retail and property, also rose 10.4 per cent last year from previously.
“Non-aeronautical activities contributed around 44.5 per cent of total revenue (excluding construction revenue) last year.”
MAHB’s revenue increased 11.5 per cent to RM4.65 billion last year, compared with the previous year.
Ng said higher revenue and a modest reduction in reported debt improved its financial leverage at the end of last year.
“Assuming no material change in the SGIA’s utilisation fee liability and MAHB’s concession-related liabilities (both key adjustment items), we estimate MAHB’s financial leverage, represented by funds from operations/debt ratio, at around 10.2 per cent, compared with the minimum tolerance level of between seven and eight per cent.
“Over the next 12 to 24 months, we expect the company’s financial leverage to remain between 11 and 12 per cent, supported by a mid-single-digit increase in passenger numbers, which will offset the incremental debt incurred to fund capital spending. The increase in passenger traffic would be supported by favourable tourism trends in Malaysia,” he said.
Over next two to three years, a key driver of MAHB’s credit profile would be Mavcom’s final decision on new tariffs for airports in Malaysia, said Ng.
“We believe Mavcom’s decision over key inputs, such as the regulated asset base and the allowed return on capital invested, will determine the impact of the new rules on MAHB’s revenue and cash flow,” he said.
Mavcom planned to publish its final framework in the second half, to be followed by a shadow testing period next year and full implementation in 2020.