Malaysia Airports share price leaps 4%

PETALING JAYA: The share price of Malaysia Airports Holdings Bhd’s (MAHB) rose as much as 4.57% following the extension of its concession agreement to operate all airports in Malaysia for 35 years until 2069.
At market close, the counter was up 26 sen or 4.1% to RM6.60, being one of the top gainers. A total of 21.26 million shares were traded.
Analysts gave the thumbs up for the concession extension, saying it would enhance the airport operator’s earnings and cash flow certainties over the longer term.
In a report yesterday, Affin Hwang Capital Research said the extension could raise MAHB’s net profit by 22% to 58%, as it will result in immediate lower depreciation and amortisation charges by an estimated RM50 million to RM100 million a year.
However, the research house has retained its “sell” rating on MAHB with a target price of RM5.40, given that the depreciation and amortisation charges are non-cash adjustments, which would not affect the valuations for the group.
Kenanga Research said the concession extension would greatly reduce the amortisation rate of MAHB’s Malaysian intangible assets, as the amortisation of assets will now be spread over a longer period of 60 years instead of the initial 25 years.
“We are positive on the extension, as this will reduce amortisation rate of their intangible assets by about 25%, further improving earnings. Post adjustment, we upgrade our FY17E earnings by 160% to RM261 million while keeping our FY16E earnings unchanged,” it said.
For FY17, the research house said it is maintaining its growth targets of 6% and 7% for Malaysian and Turkey operations, respectively, as it expects Malaysian passenger growth to remain strong from robust travel demand coupled with increased capacities from airlines.
Kenanga Research maintained its “outperform” call on MAHB, with a higher target price of RM7.47 from RM7.31 previously, in view of the better earnings prospects from the new passenger service chargers structure recently implemented, as well as the concession extension.
Following the extension, HLIB Research has also upgraded MAHB to a “buy”, from “hold”, with a higher target price of RM9 from RM6.60.
“We are positive on the long-term stable earnings growth of MAHB, riding on the growing air travel demand in Malaysia,” it added.