Thursday, 6 February 2014

MAHB share on uptrend despite KLIA2 delay

Airport operator Malaysia Airports Holdings Bhd’s (MAHB) share price was on an uptrend yesterday, reaching a high of RM8.26 before closing five sen up to RM8.20, despite the opening of KLIA2 being potentially delayed once again.

There were 1.57 million shares done.

KLIA2, the new low-cost carrier terminal (LCCT), has missed several deadlines for opening, with the last one scheduled for April 30 before being moved to May 2.

Analysts were mixed on the possible delay, following news that MAHB had yet to receive the certificate of completion and compliance (CCC) for the terminal from main joint venture contractor UEMC-Bina Puri, which had been scheduled for Jan 31.

It has been found that 65% of the main terminal did not comply with fire and safety standards upon inspection by Indah Water Konsortium Sdn Bhd, the Sepang Municipal Council and the Fire and Rescue Department in the last week of January. There were cracks in a sewerage pipe outside the terminal, and parts of the road and drainage were not fit for use. Their recommendation is essential for the issuance of the CCC.

“This is a big disappointment, given that management had briefed that everything was on track during the fourth quarter ended Dec 31, 2013 analyst briefing held on Jan 27, 2014 – just one week ago,” said Maybank Investment Bank Research analysts.

Although MAHB remains firm on the May 2 opening date, without the CCC, KLIA2 would not be able to commence the operational readiness and airport transfer (ORAT). “ORAT is an exhaustive and meticulous process and comparable projects of this scale have typically consumed three to six months, never less than three months. Based on this, we think a delay to the planned launch date looks imminent,” Maybank said.

Maybank has downgraded its call on MAHB to “sell” from “hold” previously, with a lower target price of RM7.03.

However, other analysts are convinced that a short-term delay would only represent a temporary setback to MAHB.

If KLIA2 is delayed by a quarter, then RHB Research estimates that revenue loss from rentals collected and lower passenger spending would come in at RM48mil, 1.6% of its estimated RM3bil topline, affecting only its 2014 earnings forecast.

Passenger traffic is expected to remain robust, as congestion at the LCCT is unlikely to deter holiday-makers from travelling, said Alliance Research’s Tan Kee Hoong.

“In addition, any shortfall vis-à-vis our aeronautical revenue forecasts due to a potentially slower passenger growth at LCCT, could easily be compensated by the higher profit-sharing contract charges from Malindo Air, which will continue to operate from the main terminal building until KLIA2 opens,” he added.

Both RHB and Alliance have maintained their “buy” calls on the company, with unchanged target prices of RM9.80 and RM10.37 respectively.

Bursa Securities, meanwhile, has approved the listing of and quotation of up to 124.05 million MAHB shares to be issued pursuant to its proposed private placement exercise.

The Star


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