MAHB shares up on airport OA extension
KUCHING: Shares in airport manager Malaysia Airport Holdings Bhd ( MAHB) rose in trade yesterday following its move to extend operating agreements ( OAs) for 39 airports within Malaysia.
MAHB had announced in a filing on Bursa Malaysia that the Ministry of Transport has granted approval for an extension period of the OA for KL International Airport ( KLIA) between the Government of Malaysia (GoM) and MAHB and Malaysia Airports (Sepang) Sdn Bhd, which was entered into on February 12, 2009, for an additional period of 35 years, ie from the existing 25 years to 60 years.
MAHB had also been granted approval for the extension period of the OA for designated airports between the government, MAHB, and Malaysia Airports Sdn Bhd which was entered into on February 12, 2009 for an additioal period of 35 years.
A negotiation committee will be established to negotiate the relevant new terms and conditions to be chaired by the Ministry of Transport and comprising
Overall, we are positive on the announcement as it removes uncertainty pertaining to the awarding of the extension.
members from the Ministry of Finance Malaysia, MAHB and other relevant government agencies, as required.
Following this news, the stock rose by 26 sen or 4.1 per cent yesterday to RM6.60 per share at closing.
“Overall, we are positive on the announcement as it removes uncertainty pertaining to the awarding of the extension,” the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) said in a corporate update yesterday.
According to MIDF Research, among critical items to be negotiated include User Fee charges which is a form of royalty paid to the governemt and the Marginal Cost Support Sum (MARCS) which is compensation paid by the governemnt for deferments in Passenger Service Charge ( PSC) revisions.
“MAHB could record lower amortisation expense going forward on its concession assets by as much as 58 per cent as MAHB stretches the useful life from 25 years to 60 years,” the research arm said.
Having been awarded the OA extension in December 2016, MIDF Research said this could have retrospective effect on 2016 numbers resulting in an overestimation of 2016’s depreciation which could lead to an adjustment in the fourth quarter of financial year 2016 (4QFY16) results due to be released in February.
“The OA extension could also see resolution to contract disputes including Kuala Lumpur Aviation Fuel l ing System Sdn Bhd’s demand for RM456 million in compensation,” it added.
Overall, MIDF Research maintained ‘buy’ with a target price of RM7.60 per share based on the research arm’s discounted cash flow ( DCF) model assuming weighted average cost of capital ( WACC) of 7.7 per cent and Beta of 1.1.
The research arm made no changes to its forecasts pending further clarity on terms and conditions (T& C) and amortisation.
“Further rerating catalysts for MAHB could come from higher than expected capacity addition from airlines, meaningful third party investments in the KL Aeropolis project and further guidance on future PSC revisions,” it said.
MIDF Research