PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) could potentially face a cash crunch this year, as travel bans and a drop in passenger traffic take a toll on the group’s revenue.
For FY20, the International Air Transport Association forecasts a 37% drop in Asian revenue passenger kilometre demand, while the Malaysian Aviation Commission is projecting a 36-38% year-on-year drop for passenger traffic in Malaysia
In a note, CGS CIMB Research said under normal circumstances, MAHB would be able to repay its maturing debt; however, as a result of the Covid-19 outbreak, the situation is less obvious.
“MAHB will be short of revenue in 2020, while it still has to incur substantial fixed costs. Whatever revenue is recorded on its P&L from its airline customers and airport tenants may not actually be collected in cash by MAHB, as its customers are themselves struggling with an existential cash crunch,” it noted.
In FY20, MAHB has RM1.2 billion worth of debt maturing, comprising RM1 billion of sukuk at its Malaysian business and €45 million (RM207 million) at Istanbul Sabiha Gokchen (ISG) International Airport.
Against the maturing debt, MAHB had RM3.2 billion in cash and cash equivalents as at end-2019, with cash making up RM1.45 billion and quoted unit trusts making up RM1.75 billion.
By early-January 2020, the group’s cash balance had declined to RM2.7 billion after ISG paid its annual concession fees of €115 million (RM541.6 million).
However, if the group is able to either rationalise fixed and variable costs, secure indulgences from the governments of Malaysia and Turkey to defer payments of revenue share and concession fees, or draw down its existing credit lines and secure new lines of credit, the airport operator should be able to pull through.
MAHB can tap into RM1 billion of uncommitted short-term financing facilities with local Malaysian banks to beef up its working capital. If push comes to shove, MAHB has the option to issue an additional RM1.5 billion in new sukuk, although interest rates are likely to be high.
For ISG, it should be able to meet its debt repayment obligations for FY20, but will struggle to pay those due in FY21.
It may require special approval by the government of Turkey to restructure concession fee payments due in January 2021, as well as potentially raising new debt funding or restructuring existing bank loans.
“In all probability, we believe that the governments of Malaysia and Turkey would be supportive of MAHB’s Malaysian operations and of ISG, as airports are assets of national importance and crucial to the economic wellbeing of the countries involved.
“Hence, our base case scenario is that the MAHB group will secure all the necessary government approvals and debt funding to survive the Covid-19 pandemic and then look forward to a better tomorrow,” the research house said.
CGS CIMB is maintaining a ‘hold’ rating on MAHB, with a lower target price of RM4.69. It has revised down its passenger traffic forecast for the year to a decline of 35% year on year, from 20% previously.
