This article first appeared in The Edge Malaysia Weekly on April 8, 2024 - April 14, 2024

A plan is being hatched by a couple of substantial shareholders of Malaysia Airports Holdings Bhd (MAHB) to privatise the airport operator, sources familiar with the matter tell The Edge.

It is understood that both sovereign wealth fund Khazanah Nasional Bhd, which has a 33.24% stake in MAHB, and the Employees Provident Fund (EPF), which has 7.04% equity interest, will play key roles in the privatisation, after which a 30% stake in MAHB will be hived off to infrastructure investor Global Infrastructure Partners (GIP).

While some sources say Khazanah may sell its 33.24% in MAHB to the EPF, which will trigger a mandatory general offer (MGO), a Khazanah spokesperson denies such a move.

In an email response to The Edge on whether it is looking to sell its stake in MAHB to the EPF, the Khazanah spokesperson says, “No”, and reiterated its position when the paper wrote in February about the possibility of a consortium comprising Khazanah, the EPF and GIP running MAHB: “As part of our mandate as Malaysia’s sovereign wealth fund, Khazanah is constantly reviewing its investment portfolio. However, at the present moment, there are no intentions to reduce our interest in MAHB, which we believe is a key strategic and national asset.”

The spokesperson adds, “We prefer not to comment on market speculation”, when pressed further.

The EPF, in an email response to a question on whether it was eyeing Khazanah’s 33.24% stake in MAHB, says, “As a matter of policy, the EPF does not comment on speculation and rumours.”

GIP did not respond to questions from The Edge on whether it was indeed looking to pick up a 30% stake in MAHB. It is understood that GIP could have a hand in running MAHB’s operations after buying into the company.

It is not clear if the plan will go through considering some of the flak it received from opposition politicians.

Nevertheless, the plan to have an external party manage MAHB is not new. In August 2001, the Ministry of Finance, then the largest shareholder of MAHB, entered into a memorandum of understanding with Dutch airport operator Schiphol International BV for the sale of up to a 30% stake in MAHB. However, the deal was aborted in April 2002. Subsequently, in October 2004, Minister of Finance Inc transferred its 49% equity interest in MAHB to Khazanah, thereby increasing Khazanah’s shareholding to 73%. Over the years, Khazanah has pared down its stake to the current level.

The only other substantial shareholder of MAHB, other than Khazanah and the EPF, is pension fund Kumpulan Wang Persaraan (Diperbadankan), which has 7.11% equity interest. However, a check on MAHB’s annual report for FY2022 indicates that until March 2023, state-controlled unit trust fund manager Permodalan Nasional Bhd (PNB), via its various funds, had a collective 5.93% in MAHB.

Talk of MAHB being privatised has been making the rounds in the market, and a source when asked about it says, “You are on the right track …  it could be [happening] soon.”

Another source who spoke on condition of anonymity says there are two steps to the corporate exercise — first, the sale by Khazanah of its 33.24% to the EPF, which will trigger an MGO, and second, once MAHB is privatised and delisted, a 30% stake will be hived off to GIP. A second source also says the exercise could take place soon.

Meanwhile, MAHB’s stock has gained more than a third year to date, and hit a historical high of RM10.06 apiece on April 1, but tapered off and closed at RM10 last Friday, translating into a market capitalisation of RM16.68 billion.

As at end-December last year, MAHB’s net asset per share was pegged at RM4.80. It is also noteworthy that of the 39 airports under its purview, only a handful are profitable.

Mid last month, MAHB and the government signed new operating and land lease agreements that extend MAHB’s concession to manage the airports in the country to February 2069, from 2034 previously.

For its financial year ended December 2023 (FY2023), MAHB chalked up a net profit of RM543.17 million on the back of RM4.91 billion in revenue. In FY2022, MAHB raked in RM187.2 million in net profit from RM3.13 billion in revenue.

As at end-December 2023, MAHB had cash and cash equivalents of RM1.84 billion, while on the other side of the balance sheet, the company had long-term borrowings of RM3.34 billion and short-term debt commitments of RM1.25 billion. MAHB had retained earnings of RM1.67 billion as at end-2023.

During the period in review, its operating activities generated net cash of RM1.68 billion. MAHB’s finance cost for the 12 months in review was RM666.31 million.

On its prospects, MAHB says, “MAHB’s network of airports recorded 119.5 million passenger movements in the year 2023, surpassing 100 million total passenger movements for the first time since 2020. This achievement was partly driven by the increase in air travel demand, approvals of more slots at other international airports, the reactivation of additional aircraft, new aircraft deliveries and the gradual reopening of China’s borders from Jan 8, 2023.

“The International Air Transport Association in its December 2023 report indicated that Asia-Pacific and global passengers in 2024 are expected to reach 110% and 109% of 2019 levels respectively. The Airport Council International forecast Asia-Pacific region passenger recovery to reach 99.5% of 2019 levels in 2024, while global passenger recovery is expected to reach 102.3% of 2019 levels for the same period.

“The Malaysian Aviation Commission’s Waypoint Report, issued in December 2023, forecast overall Malaysia passenger movements for 2024 to grow between 93.9 million and 107.1 million passengers, representing an increase of 10% to 25% over 2023. The latest airlines’ seat capacity filing for 2024 shows a 13% increase over 2023, with the visa-free entry for Chinese and Indian passengers expected to boost traffic recovery, particularly in the Northeast Asia region.

“MAHB’s prospects remain favourable, supported by passenger traffic growth and further strengthened by the group’s ongoing strategy in enhancing its airline and hub connectivity, rejuvenating commercial and retail spaces as well as accelerating off-terminal opportunities,” MAHB says.
 

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