Muhibbah’s Cambodia airport quandary leaning towards best-case scenario
Researchers with CGS International (CGS Research) had a meeting with Muhibbah, coming away feeling more positive that its Phnom Penh airport concession will see a favourable outcome.
“We highlighted in our previous reportthat, although its Siam Reap airport was surrendered to the Cambodian government in October 23, a new international airport in Phnom Penh known as Techo International Airport, located in Kandal, is currently in construction and scheduled to start operations in 1H25, according to Cambodia’s State Secretariat of Civil Aviation (SSCA).
“We believe this will replace the current Phnom Penh International Airport operated by Muhibbah,” it said.
Muhibbah said negotiations with the authorities are progressing well and the most ideal scenario CGS Research had posited may actually come to fruition, meaning Muhibbah receives compensation for the loss of its existing operations of Phnom Penh airport (likely at BV) and be engaged to operate the new airport at Kandal.
“This is because the new airport is being built by a JV between SSCA and the Overseas Cambodia Investment Corporation (OCIC), which is owned by a local businessman, both of whom do not have the expertise to run an airport.”
Muhibbah now owns a 21 per cent effective stake in Cambodia
Airports, which manages two operating airports in Cambodia: Phnom Penh and Sihanoukville.
Currently, its fourth quarter 2023 (4Q23) associate profit contribution was RM27 million, coming largely from its Cambodia airport concession, which also benefited from a 20 per cent increase in passenger service charge for all three airports in Cambodia (Phnom Penh, Sihanoukville and Siam Reap) in September/October 2023.
The three airports in Cambodia clocked 4.8 million passenger arrivals in 2023, up 102 per
cent year on year (y-o-y), said Muhibbah, while 4Q23 passenger arrivals rose 16 per cent y-o-y to 1.1 million.
Muhibbah’s 4Q23 included one-offs of circa RM66 million, the largest of which was a RM40 million provision for long outstanding claims.
“We expect better earnings delivery in FY24-FY25, anchored by its RM2.2 billion orderbook as at February 24 and gradual recovery for its Cambodia airport concessions while activity at its shipyard has also picked up.
“Its construction division made RM17 million in 4Q23 pretax profit and it continues to bid for more Petronas contracts, leveraging on its Petronas fabrication licence. 4Q23 pretax profit for its crane business rose 56 per cent quarter on quarter (q-o-q) to RM31 million.
“We like Muhibbah as a proxy for a recovery in tourist arrivals with its Cambodian airport concessions while its marine expertise and Petronas fabrication licence should enable it to clinch more Petronas jobs.”