KLIA2 to see possible six months delay
KUCHING: Malaysia Airports Holdings Bhd (MAHB) has announced that its contractors might have difficulty completing the Kuala Lumpur International 2 (KLIA2) which was scheduled for opening on June 28, 2013.
While the group did not proffer a new date for the opening of KLIA2, analyst Ahmad Maghfur Usman of RHB Research Institute Sdn Bhd (RHB Research) opined that a sixmonth delay was highly likely.
“Even if the new terminal can be completed by September after a two-month delay, MAHB would still need to carry out operation trial runs that may require at least four months,” Ahmad Maghfur highlighted.
Meanwhile, despite the delay in KLIA2’s opening, the analyst believed that costs overruns were unlikely for MAHB.
In its announcement, MAHB emphasised that the delay was potentially due to its contractors’ inability to fulfill their commitments to complete KLIA2 on schedule for its targeted June 28 opening.
As such, Ahmad Maghfur said, “We view this as an indication that MAHB is unlikely to assume any cost overruns since the delay is not due to variations in the terminal’s design and the contractual terms are fixed.”
Apart from that, with regards to MAHB’s strengthening share price early this week after the general elections, the analyst opined that the share price could have priced in a likely six-month delay in KLIA2’s opening, at most.
“Neutralising this negative factor is the high possibility of the airport operator getting approval for a tax relief totalling RM1 billion from its investment tax allowance.
“Now that the polls are over, there is also greater certainty that the company will obtain an extension on its airport concession,” he explained.
In addition, the analyst opined that there was a high chance for MAHB’s fair value (FV) to be revised higher than the research firm’s indicative FV of RM6.50 per share should KLIA2’s opening date be delayed to January 1, 2014.
Analyst Ahmad Maghfur attributed this view to the high probability of MAHB obtaining an investment tax allowance as well as higher non aeronautical revenue and airport tax revenue should the new Malindo airline commence its turboprop operations at the Subang terminal.
“We are maintaining our earnings forecasts for now pending the announcement of a new opening date,” the analyst said. As such, he maintained the FV at RM7.23 per share, premised on a weighted average cost of capital of 7.6 per cent.