MAHB to collect higher revenue, post better earnings with new passenger service charges

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) is expected to collect higher revenue and achieve stronger earnings through the increased passenger service charges (PSC) coming into effect on June 1, 2024.

Hong Leong Investment Bank Bhd (HLIB Research) said this includes the new PSC for transfer passengers, and incremental aircraft landing and parking charges."MAHB's cashflow will also improve, allowing for higher capex spending," it said in a note.

Meanwhile, the investment bank said while there will be slight increase to T2's and other airports' Asean PSC to RM50 from RM35, it do not expect material impact to air travel demand for Capital A Bhd.

However, it noted that the relatively higher increase for T1's Asean PSC to RM73 from RM35 may provide stronger competitive advantage to Capital A.

On the other hand, HLIB Research said the Asean PSC at RM50 from RM73 will not change AirAsia X Bhd's (AAX) competitiveness, given AAX has been collecting RM50 for PSC all this while.Yesterday, the Malaysian Aviation Commission (Mavcom) has announced the implementation of the First Regulatory Period (RP1) for MAHB effective Jun 1, 2024 to Dec 31, 2026.

There will be revisions to PSC and introduction of new PSC for transfer passenger (passenger who is transferring to other flights).

There will also be increase in aircraft landing and parking charges within RP1.

On that note, HLIB Research has maintained "Buy" call Capital A with an unchanged target price of RM1.40, as the group continues to show improving results, leveraging onto the improving air-travel outlook in the region.

"We expect further potential upside to our target price should the Practice Note 17 (PN17) regularisation plan be successfully executed," it noted.

The investment bank also maintained a "Buy" call for MAHB with a target price of RM9.80.

It said MAHB will continue to leverage onto the anticipated recovery of air travel demand in the financial year 2024 to 2025 (FY24-FY25) and the finalisation of operating agreement (OA) and regulatory asset base (RAB) structure in strengthening MAHB's commitment towards airport developments in Malaysia.

"The disposal of GMR Hyderabad International Airport Limited (GHIAL) for US$100 million by the first quarter of financial year 2024 (1QFY24) will also strengthen MAHB's balance sheet," it added.

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