MAHB pursues Turkish airport stake sale
Analysts say airport operator is improving earnings and cash flow
PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) is actively scouting for suitable partners to buy a portion of its stake in Istanbul’s second-largest airport – Sabiha Gokcen International Airport (SGIA).
Analysts, who are expecting the sale to materialise by this year, said the move by the airport operator is seen as enhancing its Turkish airport’s prospects, and improving its earnings as well as cash flow. MAHB owns the entire equity stake in SGIA.
Responding to StarBiz’s queries, the airport operator said it was actively considering suitable partnerships in SGIA.
Without spelling out details, MAHB noted that there was no fixed timeline or equity partnership quantum in identifying the partner, as its priority is to ensure that the partnership would enhance the airport’s value. “MAHB is committed to remaining as the airport operator for SGIA, as we have added significant value to the airport.
“It is one of the most vibrant airports in Turkey in terms of growth and is strategically located on the Asian continent that accounts for 95% of the country’s area. It also serves a large catchment area as a regional hub between Europe and Asia.
“MAHB recognises the growth potential and has invested in additional capacity for the airport by constructing a new boarding hall to serve an additional eight million passengers. Turkey has also constructed a second runway, which will be opened by this year and will further increase the capacity of the airport,” MAHB noted.
MAHB’s fourth-quarter earnings for the year ended Dec 31, 2017 were dragged down by higher total costs and losses from its Turkish operations, as its earnings fell 16.3% to RM27.86mil from RM33.32mil, although revenue was higher at RM1.24bil from RM1.08bil a year ago.
Its Turkish operations registered a loss before tax of RM61.7mil for the quarter under review. MAHB is reported to be in talks with various parties to sell a portion of its 100% stake in SGIA. It would, however, remain the major shareholder of SGIA.
Asked whether it was looking to unlock the value of its foreign investments or make acquisitions overseas, MAHB said increasing the international business footprint was one of its objectives in the Runway to Success 2020 business plan, and it would do so by building a more balanced portfolio of investments beyond Malaysia, through equity acquisitions as well as management contracts.
It operates 39 airports in Malaysia, and one in Turkey. MAHB has gained a strong track record in its international ventures, including facility management contracts at Hamad International Airport, Doha, Qatar.
Istanbul SGIA is expected to register 34 million passenger movements in 2018 in line with the stable economic growth in Turkey.
Early this month, MAHB announced that it had sold its entire 11% stake in GMR Hyderabad International Airport Ltd to India’s GMR Airports for US$76.05mil (RM295.34mil) cash.
Commenting on the sale of its stake in India and whether there were plans to re-enter the market, the airport operator said India remained a potential market, as there were many airports to be opened and privatised by the Indian government, including secondary airports, in the next 15 years.
“We may explore new opportunities in India, as we are in a good position to leverage on our track record, although we are cautious about the potential risks affecting the aviation industry there such as socio-economic status and bureaucracy,” it noted.
The counter closed up four sen to RM8.80, translating to a market cap of RM14.6bil.
The company has recommended a final dividend of eight sen per share for financial year 2017 (FY17). Together with the earlier interim dividend of five sen per share, the total dividend for the year is 13 sen per share (FY16: 10 sen per share).
Kenanga Research in a recent note said it was targeting a double-digit growth target of 10% for its Turkey operations in FY18, adding that it was optimistic on the recovery of Turkey from the negative streak of events which shook the country since early FY16.
Meanwhile, analysts said the dampener for MAHB was the proposed new aeronautical charges framework – Quality of Service and Regulated Asset Base – which would be used as key parameters to determine aeronautical charges. Some reckoned this could incur additional capital expenditure for MAHB and cap its long-term revenue growth.
The Malaysian Aviation Commission is looking to gradually roll out QOS framework from July 2018, and RAB framework for aeronautical tariff determination for implementation from 2020.