18 May 2021
MALAYSIA Airports Holdings Bhd (MAHB) stands to benefit handsomely from the provision of Covid-19 screening and testing at its international airports, sources familiar with the matter tell The Edge.
It is understood that the tender document in which MAHB is seeking to award the screening and testing at its airports contains a requirement that about 25% of the top line from the services should go to MAHB.
One of the shortlisted bidders tells The Edge, “Yes, it (the 25% quantum requirement for MAHB) is in there (the tender document).”
On whether he considers the quantum to be high, he declines to comment, saying, “It’s like rental.”
When asked about the 25% quantum, the airport operator in an emailed response says, “In keeping with our corporate governance for any tender proceedings, the commercial terms are confidential between the bidder and MAHB.”
It is understood that MAHB is looking at testing as many as 10,000 passengers at KLIA and an additional 10,000 passengers at klia2, for a start. Once operations at these airports are running smoothly, the other airports will follow suit.
In 2019, KLIA had 29.2 million passengers while klia2 had 33.1 million. This works out to passenger traffic of 80,000 a day for KLIA and close to 91,000 a day for klia2. With the delay in reopening borders, travel restrictions, travel bubble arrangements and reciprocal green lane travel, MAHB is understood to be looking at testing as many as 20,000 passengers on a daily basis — 10,000 each in KLIA and klia2 — with the other international airports following later.
The Edge understands that the charges for the testing and screening per passenger can be between US$130 and US$150 (about RM535 to RM618) and will be borne by the passenger. This works out to between RM5.35 million and RM6.18 million a day for 10,000 passengers as per MAHB’s guidance in the tender documents.
This would mean annual revenue of between RM1.95 billion and RM2.26 billion for the screening and testing provider, and between RM488.19 million and RM563.92 million for MAHB, from one airport, considering 25% of revenue goes to the airport operator.
For its financial year ended December 2020, MAHB suffered a net loss of RM1.12 billion from RM1.87 billion in revenue. For FY2019, it chalked up a net profit of RM537.04 million on the back of RM5.21 billion in sales.
According to MAHB, the 64.2% drop in revenue is “in tandem with the contraction in passenger movements of 69.5% due to the unprecedented outbreak of Covid-19 which has resulted in large capacity cuts, travelling bans and border closures across the globe”.
It attributes the loss to the significant decrease in revenue and an impairment of RM500.4 million from its Istanbul Sabiha Gokcen International Airport in Turkey’s concession rights, brought about by a significant contraction in passengers as a result of the pandemic.
For FY2020, MAHB recorded 43 million passenger movements, a contraction of 69.5% over the previous year, while aircraft movements decreased 58.1%, resulting in the bleeding.
“Hence this (payment from the Covid-19 screening and testing provider) will help them (MAHB) recoup some of what they have lost,” an official at one of the companies interested in the screening and testing contract says.
He adds that the 25% quantum is among the reasons many companies opted out of the tender.
“Over and above the 25% or 26%, we have to use many other facilities from MAHB, which further decreases margins … so it’s not a walk in the park; it may be difficult (to make ends meet),” he says.
The Edge understands that 31 companies had taken the tender documents, with 17 expressing interest, and 10 having been shortlisted by MAHB.
Another deterrent, the official says, is the short time frame for constructing the facilities. It is not clear if MAHB is looking at one player doing the screening and testing at all the international airports, or if the contracts will be broken down according to airports, with different operators managing and operating the services at different airports. However, among the criteria for the award is that the winning bidder has to build testing lounges at the airports.
“From what I understand, MAHB wants to start everything in a rushed manner, so it may not be conducive for some of the players,” he opines. According to him, the award and commencement of operations are slated to be in May, but MAHB has not made any announcements on this.
So far, The Edge has identified five of the 10 companies shortlisted by MAHB. They are MyEG Services Bhd (MyEG) in partnership with BP Clinical Lab Sdn Bhd; Bestinet Sdn Bhd in a joint venture with Tass Tech Sdn Bhd; Maju Healthcare Sdn Bhd with Gribbles Pathology (M) Sdn Bhd; UEM Edgenta Bhd in a standalone bid, and another involving MNC Global Sdn Bhd.
Most market watchers say UEM Edgenta could rope in Pantai Holdings Sdn Bhd, which has laboratory facilities, to strengthen its bid. Pantai Holdings, which operates the Pantai Hospital chain, is part of IHH Healthcare Bhd, a 26.03% unit of state-controlled investment arm Khazanah Nasional Bhd. Khazanah has a 69.14% stake in UEM Edgenta and a 33.21% stake in MAHB as well, which would put UEM Edgenta in a good position, and make its bid the one to beat.
Others perceived to have strong bids are the MyEG and BP Clinical Lab partnership, and the Maju Healthcare and Gribbles tie-up.
MAHB closed last Thursday at RM5.57, translating into a market capitalisation of RM9.25 billion.