CGS-CIMB expects delay in Mavcom’s planned aeronautical tariff increase

10 October 2023

CGS-CIMB Securities has maintained its “add” rating for Malaysia Airports Holdings Bhd (MAHB) at RM7.23, with an unchanged target price (TP) of RM7.76, and said investors should be prepared for the Malaysian Aviation Commission’s (Mavcom) proposed aeronautical tariff increase from Jan 1, 2024 to be delayed, as the regulator had not issued its final proposals, which need to be gazetted in Parliament.

In a note on Tuesday, the research house said that in March, Mavcom had proposed a 6.89% rise in tariffs effective next year.

“We remain positive on MAHB, with rerating catalysts including the upward trajectory of international traffic, while commercial rentals and revenues should also recover sharply, as MAHB terminates rental discounts from Jan 1, 2024 and more airport shops reopen,” it said.

Meanwhile, CGS-CIMB said a potential MYAirline collapse could result in a bad debt write-off of about 3% of group earnings per share this year, and leave MAHB without 9% of domestic seats.

The research house was commenting on a report that MYAirline had not been paying its staff salaries and its suppliers on time, suggesting financial distress.

MYAirline is a low-cost carrier flying out of the Kuala Lumpur International Airport Terminal 2 (klia2).

The airline is 98% owned by a certain Datuk Goh Hwan Hua, and 2% by its ex-chief executive officer Rayner Teo Kheng Hock, who apparently resigned last week, according to the report.

CGS-CIMB said because MYAirline is primarily domestic in nature, and had only 9% market share of the domestic Malaysian seat capacity at its peak in August, the impact of a potential collapse of the airline on MAHB will not be overly damaging.

“Our estimates indicate that a bad debt write-off of MYAirline’s dues to MAHB could impact our FY2023 (financial year ending Dec 31, 2023) group core net profit (forecast) by about 3% (or about 6% of MAHB’s Malaysia-only core net profit); we expect MAHB to make the necessary write-offs in its third- or fourth-quarter results announcement, if it has not already done so.

“We reiterate ‘add’, with an unchanged end-calendar year 2024 sum-of-parts-based TP of RM7.76; we expect the MYAirline issue to be a relatively minor speed bump for MAHB,” it said.

At the time of writing on Tuesday, MAHB had added 0.83% or six sen to RM7.29, with 132,300 shares traded.

Source: theedgemalaysia.com

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