MAHB privatisation talk resurfaces, analyst unconvinced

KUALA LUMPUR: The privatisation talk of Malaysia Airports Holdings Bhd (MAHB), one of the world's largest airport operators, which resurfaced recently has been quickly quelled by at least one analyst.

A financial weekly cited unidentified sources as saying that MAHB could be privatised by its major shareholders before a stake sale to private equity firm Global Infrastructure Partners (GIP). 

Specifically, major shareholders Khazanah Nasional Bhd and Employees Provident Fund (EPF), which own 33.2 per cent and seven per cent stake in MAHB respectively, reportedly would be instrumental in the privatisation. 

Thereafter, a 30 per cent stake in MAHB will be sold to GIP, a United States-based infrastructure investment fund involved in equity and selected debt investments. 

This could be probably due to MAHB's shares not liquid enough for GIP to acquire a substantial stake over a reasonable time frame. 

Kenanga Investment Bank Bhd (Kenanga Research) analyst Raymond Choo said "the story is not convincing" largely due to the absence of price details.

"We do not find the story convincing given the lack of details, particularly the absence of an indicative offer price.

"Nevertheless, the plan to have an external party to manage MAHB is not new," Choo added.

The purported plan to privatise MAHB to GIP reportedly emerged as early as late 2019 after Khazanah's management shake-up.

The plan by the sovereign wealth fund had then been met with criticism by Datuk A. Kadir Jasin, the communications adviser to the prime minister at that time.

He said the deal was shrouded in secrecy and being pushed by parties with vested interest.

In August 2001, the Finance Ministry signed a memorandum of understanding with Schiphol Group to allow the latter to acquire a strategic investment in MAHB.  However, the deal was aborted.

MAHB remained in the black for fourth consecutive quarter in the period ended Dec 31, 2023,  indicating the worst was over for the company.

Although it did not get any confirmation on the news, TA Securities Holdings Bhd believes the privatisation has its merits as it can solidify Malaysia's market position to rival Singapore Changi Airport and Airports of Thailand Plc as a transit hub.

"As such, we do not expect major stumbling blocks to the privatisation, if it happens, provided the consortium does not undertake major layoffs."

TA Securities said MAHB's pre-tax profit had turned around to RM456.3 million in the fourth quarter of  2023, underpinned by revenue growth of 57.2 per cent. 

The decent results can be attributed to higher aeronautical revenue and non-aeronautical revenue, supported by higher passenger movements of 55.2 per cent in Malaysia and 20.5 per cent in Turkiye.

Kenanga Research said for illustration purposes, assuming the MAHB privatisation is at RM10 per share, the price earnings ratio (PER) valuation works out to 25 times and 18 times its financial year 2025 earnings per share (EPS) and consensus EPS, respectively. 

This implies a discount of 26 to 47 per cent compared to closest-listed peer Airports of Thailand which trades at 34 times financial year 2025 consensus EPS.

"We believe the PER valuation discount to closest-listed peer, i.e. Airports of Thailand makes sense considering that Thailand's tourism revenue is three times larger than Malaysia's."

Based on financial year 2025 forecast of  PER of 24 times, MAHB trades at discount to pre-Covid 19 three-year average historical one-year forward PER of 35 times.

Kenanga Research has maintained its earnings forecasts, target price of RM9 and "market performer" call on MAHB.

According to Dr Azmi Hassan, senior fellow at Nusantara Academy for Strategic Research, rumours of MAHB going private and then being acquired by GIP have been swirling about since 2020.

"Regarding the latest round of rumours, it appears that the group interested in selling MAHB wants to gauge public sentiment, particularly from the government, given that the airport operator, much like Malaysia Airlines, is a highly sensitive issue when controlled by a foreign entity. 

"Given the sensitivity and profitability of this venture, it seems the proponents of the sale aim to assess whether the government and the public are open to the idea of all 39 airports in Malaysia being controlled by a foreign entity, in this case GIP," he said.

Senior fellow Dr Oh Ei Sun of  Singapore Institute of International Affairs said as there are already several private airport operators in Malaysia, privatising MAHB would mean more competition.

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