KUALA LUMPUR (Aug 6): Mercury Securities believe Malaysia Airports Holdings Berhad (KL:AIRPORT) (MAHB) offers promising arbitrage trading opportunities with a potential return of around 11% or more, if its share price drops further.
The research house said this is based on a takeover bid at RM11.00 per share from a consortium including the Employee Provident Fund (EPF), Khazanah Nasional, Abu Dhabi Investment Authority and Global Infrastructure Partners.
Mercury expects MAHB to trade closer to the RM11.00 offer price once all preconditions are met and a formal offer is made, with the privatisation exercise estimated to be completed by the fourth quarter of 2024.
One of the four preconditions has already been fulfilled. On 13 June, MAHB announced that the General Authority for Competition of Saudi Arabia (GAC) had issued a certificate confirming that the privatisation deal does not require notification to the GAC. The remaining approvals are needed from the Malaysian Aviation Commission, Turkish Competition Authority and Egyptian Competition Authority.
"The worst-case scenario that could happen is that the privatisation bid by EPF and Khazanah is called off. Nevertheless, we believe the downside risk is limited even in this case, as MAHB’s fundamentals remain solid," said the research house.
Mercury spotlighted MAHB’s strong fundamentals, with the airport operator recording a total of 65 million passenger movements in 1H2024, representing a 15.8% year-on-year growth and nearly returning to pre-pandemic levels of approximately 95.4%.
Before the takeover announcement in May, the average consensus target price for MAHB was RM9.70, with a range of RM8.50-11.30, according to 15 analysts polled by Bloomberg.
MAHB's share price has been on an upward trend since 2020, showing a pattern of higher highs and higher lows. "The bullish trend was further confirmed when the share price broke through the ascending channel pattern with strong momentum in late 2023," Mercury added.
Since then, MAHB’s share price has continued to rise and has been trading above all its exponential moving average lines, further boosted by the RM11.00 offer price announcement in May 2024, said Mercury.
MAHB's shares open unchanged at RM9, translating into a market capitalisation of RM16.5 billion.