MAHB’s India airport stake sale a positive

PETALING JAYA: The proposed divestment of Malaysia Airports Holdings Bhd’s (MAHB) entire 11% stake in GMR Hyderabad International Airport Ltd (GHIAL) for RM479mil is positive as it has not contributed meaningfully to the former’s bottom line.

In terms of dividends, Kenanga Research noted that MAHB received about RM31mil or an average of RM2mil per year between 2009 and 2022 from its 11% stake in GHIAL.

MAHB had said it was divesting its entire stake in GHIAL, the holding company that manages Hyderabad International Airport in India to the GMR Group for RM479mil or about US$100mil. The airport operator group acquired the stake in 2009 for US$10mil from GMR Group.

Kenanga Research, which is positive on the divestment, said this is in line with MAHB’s strategy to divest its non-core assets.

The research firm said that MAHB is slated to record a RM114mil or 6.9 sen per share gain on the disposal, while its book value will rise from RM4.61 per share to RM4.68 per share as of June 30, 2023. MAHB’s net debt and gearing, meanwhile, will drop from RM3.5bil to RM3bil and 0.45 times to 0.39 times as of end-June 2023, respectively.

The proposed divestment is expected to be completed in the first quarter of 2024 and will not require shareholder approval.

Touching on the sector’s outlook, Kenanga Research expects business and leisure air travel to continue to recover throughout 2023 with activity poised to return to pre-pandemic levels in 2024.

According to Tourism Malaysia, tourist arrivals in Malaysia are expected to jump 60% to 16 million in 2023 from an estimated 10 million a year ago.

A key driver is Chinese tourists who historically contributed an estimated 12% to total tourist arrivals in Malaysia.

In 2024 we project tourist arrivals to expand further by 24% to 20 million, compared to the pre-pandemic level of 26 million,” the research house added.

Meanwhile, CGS-CIMB Research said, based on MAHB’s guidance, it expects the airport operator to repatriate the proceeds of the disposal back to Malaysia, and use it for “capital expenditure, general corporate purposes and to defray the expenses in relation to the disposal”.It notes that MAHB has debts coming due.

“MAHB is due to repay RM600mil of Islamic medium-term notes (IMTN) on Dec 27, 2024, and its RM1bil perpetual sukuk bond on Dec 15, 2024. A further RM500mil of IMTN is due to mature on April 25, 2025,” CGS-CIMB Research said.

“Potential re-rating catalysts for the stock include the signing of the new Operating Agreement by the end of 2023, and higher aeronautical tariffs set to be announced by Malaysian Aviation Commission, the aviation regulator, hopefully by end-2023,” said CGS-CIMB Research, which reiterated its “add” call on the stock, with a target price of RM7.76.