Air­port REIT likely to gen­er­ate RM700mil a year

Govt also plans to sell a 30% stake of its air­port as­sets via REIT

The Star Malaysia - StarBiz - - Front Page -

PE­TAL­ING JAYA: The pro­posed Air­port Real Es­tate In­vest­ment Trust (REIT), the first of its kind in the world, is ex­pected to gen­er­ate more than RM700mil per an­num.

An­nounced dur­ing Bud­get 2019 last week, it will see the de­par­ture levy on in­ter­na­tional pas­sen­gers be­ing in­tro­duced from June 1, 2019. The gov­ern­ment will sell a stake in its air­port as­set into a REIT struc­ture and use the pro­ceeds for en­hance­ment cap­i­tal ex­pen­di­ture (capex).

The de­par­ture levy is ap­pli­ca­ble to ev­ery in­ter­na­tional de­par­ture at a rate RM20 for Asean des­ti­na­tions and RM40 for other re­gions. This would de­liver more than RM766mil per an­num, said May­bank In­vest­ment Bank Re­search (May­bank IB) in a re­port.

It said the gov­ern­ment also planned to sell a 30% stake of its air­port as­sets via a REIT struc­ture for tar­geted net pro­ceeds of RM4­bil.

“The monies will be used to up­grade ex­ist­ing air­ports and ex­pand con­gested ones. The ex­act struc­ture of the Air­port REIT is sketchy for now, but we do not think it will be puni­tive to Malaysia Air­ports Hold­ings Bhd (MAHB) due to safe­guards from its op­er­at­ing agree­ment with the gov­ern­ment.”

May­bank IB pointed out that the gov­ern­ment in­tended to use the pro­ceeds and up­grade ex­ist­ing air­ports and ex­pand ca­pac­ity for con­gested ones.

“This is a pos­i­tive way to raise funds with­out tap­ping into the fed­eral tax pool. In the­ory, there are many mer­its to do this and it will pro­vide the cap­i­tal mar­ket with an in­come gen­er­at­ing in­fra­struc­ture as­set of qual­ity.

“The gov­ern­ment, un­der Bud­get 2019, stated that it is con­sid­er­ing to mon­e­tise other as­sets via the REIT struc­ture such as hospi­tals and rail in­fra­struc­ture. There­fore, this Air­port REIT is a bench­mark for other ini­tia­tives.”

The re­search house, how­ever, said the struc­ture was not with­out its share of com­plex­i­ties.

“Air­ports are in con­stant need of main­te­nance capex. Fur­ther­more, most air­ports will reach their de­sign ca­pac­ity over a 10-year cy­cle and re­quire ma­jor ca­pac­ity ex­pan­sion. Malaysia’s REIT struc­ture only al­lows a 15% pro­vi­sion for ex­pan­sion, and this might not be suf­fi­cient for air­ports.”

Al­lianceDBS Re­search said the planned REIT ap­peared to be pri­mar­ily se­cu­ri­tis­ing cash flows from user fees, where the ex­ist­ing agree­ment is MAHB pays a pro­gres­sively es­ca­lat­ing pro­por­tion of air­ports rev­enues to the gov­ern­ment (11.73% in the first half of 2018).

“The ab­so­lute amounts were RM392mil and RM362mil in 2016 and 2017 re­spec­tively.”

Mean­while, May­bank IB said the de­par­ture levy would be neg­a­tive for air­lines, adding that MAHB would be largely un­af­fected.

“The de­par­ture levy will neg­a­tively im­pact AirAsia and AirAsia X’s pas­sen­ger load as their pas­sen­gers are per­ceived to be price sen­si­tive.

“His­tor­i­cal ac­counts are mixed re­gard­ing the im­pact of tax hikes on air travel; in Europe, it caused a multi-year traf­fic de­cline while in Hong Kong and Sin­ga­pore, it merely re­duced the traf­fic growth mo­men­tum slightly. The jury is not yet out whether the de­par­ture levy will kill pas­sen­ger de­mand.”

— Ber­nama

Rais­ing funds: The de­par­ture levy is ap­pli­ca­ble to ev­ery in­ter­na­tional de­par­ture at a rate RM20 for Asean des­ti­na­tions and RM40 for other re­gions.

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