MAHB’s Penang ops to remain strong
KUCHING: Malaysia Airports Holding Bhd’s ( MAHB) Penang International Airport ( PIA) is expected to benefit from the possible opening of the Kulim International Airport ( KIA) in Kedah, even if the airport will be operated by another party aside from MAHB, analysts say.
Of note, as one out of five high impact projects aimed at bridging the development gap between regions in the Mid-Term Review of the 11th Malaysia Plan, the government had recently approved RM1.6 billion to build KIA in Kedah.
According to a report by MIDF Amanah Investment Bank Bhd’s research team ( MIDF Research), prior to this, the state of Kedah received Federal Government’s approval to establish a company called KXP Airport City Holdings to coordinate and manage the development of KIA.
“Taking into account of the abovementioned factors, we do not foresee any dilution in earnings for MAHB coming from PIA in the wake of KIA’s development, assuming that KIA will be operated by another party aside from MAHB, similar to MMC Corporation Bhd’s Senai International Airport in Johor.
“Even if KIA were to be under MAHB’s stable of airports, this would serve as an opportunity for MAHB to strengthen its footprint in Malaysia’s Northern Region,” MIDF Research opined.
It noted that while such plans would bring up concerns of businesses shifting to Kulim due to lower cost of doing business, it believed that this would be limited with the presence of major global logistics player such as FedEx in PIA.
It further explained, FedEx set up an RM17.6 million shipping facility spanning 4,830 m2 called the ‘FedEx Gateway’ at PIA which enables goods to be shipped to the US in one business day and overnight delivery to 20 major Asian cities.
“The services offered by FedEx are made possible with two Boeing 767s and three 40ft trucks connecting Penang by road to Bangkok and Singapore.
“Internally, the facility features an X-ray scan for all packages regardless of size and has the capacity to sort 2,700 parcels per hour.
“As such, we bel ieve the existence of such logistics players to retain the attractiveness of PIA as an air cargo hub for MNCs,” said the research team.
MIDF Research also highlighted that PIA would still have the upper hand in international traffic growth.
“PIA’s total passenger traffic has been growing at a five-year compounded annual growth rate (CAGR) of 7.2 per cent.
“PIA handled 7.78 mi l lion passengers in 2018 exceeding the design capacity of 6.5 million with international passengers growing by 15.2 per cent to 1.54 million this year.
“As such, expansion projects to expand capacity to 12 million passengers will start in 2020.
“Furthermore, we believe that MAHB will continue attracting more international airlines to fly to PIA as what was seen for Langkawi International Airport which welcomed the first flight of TUI Airways from Birmingham.
“Therefore, PI A’ s passenger growth especially for international would not be undermined even if KIA focuses on commercial flights,” it added.
Looking ahead, MIDF Research expected MAHB to maintain its upward trajectory especially in terms of passenger growth amidst the relaxation of visa policies for Chinese and Indian nationals visiting Malaysia.
“Moreover, we expect MAHB’s efforts in not only attracting more new airlines but also offering increased connectivity to weigh on the effects of the departure levy set to be imposed in June 2019 for outgoing international passengers.
“As such, we reiterate our optimism that MAHB passenger numbers can surpass the 100 million mark in 2019, while maintaining a relatively conservative growth rate of 3.5 per cent,” it said.
MIDF Research maintained its ‘ buy’ call on the stock.