This article first appeared in The Edge Malaysia Weekly on September 23, 2024 - September 29, 2024
THE share price of Malaysia Airports Holdings Bhd (MAHB) (KL:AIRPORT) is edging closer to the Khazanah Nasional Bhd-led consortium’s offer price of RM11 apiece to take the airport operator private.
MAHB’s stock closed at its intra-day high of RM10.48 last Friday, up 9% from a low of RM9.60 on June 26, following the announcement of Gateway Development Alliance’s (GDA) privatisation bid worth RM10.79 billion. Friday’s closing price was still 5% below the RM11 offer price — which is above the stock’s all-time high of RM10.50.
Analysts say the narrowing price gap suggests that the privatisation deal is on track for implementation.
“The narrowing price gap, which indicates the deal is on track, is good to see,” says an analyst with a local brokerage firm.
“I believe the single most important factor driving the share price now is the price of the GO (general offer), which the market price will move towards if investors take a view that the deal will go through.”
Sovereign wealth fund Khazanah (with 33.248% equity interest) and the Employees Provident Fund (EPF) (7.859%) currently own 41.107% of MAHB. In May, GDA, comprising Khazanah via its wholly-owned subsidiary UEM Group Bhd, the EPF, the Abu Dhabi Investment Authority (ADIA) and Global Infrastructure Partners (GIP), offered MAHB shareholders RM11 per share to take the company private. The offer was more than 6% higher than the stock’s last traded price of RM10.40 before the May 15 privatisation announcement.
Post-privatisation, Khazanah would own 40% of MAHB, the EPF 30% and ADIA and GIP the remaining 30%.
The consortium has encountered mounting political opposition to the deal. However, most analysts still believe the controversial deal will succeed. The proposed MAHB privatisation, with only the Malaysian Aviation Commission’s (Mavcom) regulatory approval remaining, is an integral part of the major shareholders’ mission to put the airport operator back on course to compete with international rivals.
The success of the privatisation, targeted for completion in the fourth quarter of 2024, is also contingent on the total acceptance of at least 90% of the shares held by the consortium. Another substantial shareholder of MAHB is Kumpulan Wang Persaraan (Diperbadankan) (KWAP) with a 7.148% stake.
An industry observer points out that bringing in GIP as a partner will help transform Malaysia’s airports as MAHB can benefit from substantial investment and strong financial backing.
“From a commercial perspective, the vision is to make Kuala Lumpur International Airport (KLIA) a world-class airport. Obviously, a lot of things need to be done and that requires a huge amount of capital. They would need funds to do all the significant investments to help develop the airports in Malaysia, particularly KLIA,” he tells The Edge.
MAHB has seen a leadership change since the privatisation offer with Datuk Mohd Izani Ghani assuming the position of managing director on Aug 1. A member of the airport operator’s board from 2011 to 2019, Mohd Izani has more than three decades of investment and management experience. Prior to his appointment at MAHB, Mohd Izani had served as managing director of UEM Group from August 2019.
MAHB’s share price has been inching upwards since the company posted a strong set of results for its second quarter ended June 30, 2024 (2QFY2024) on Aug 30. The airport operator, which manages 39 airports in the country, doubled its net profit to RM205.8 million in 2QFY2024, from RM102.5 million a year ago, on higher passenger volume.
For 1HFY2024, the group recorded a 146.3% increase in net profit to RM395.8 million from RM160.7 million in 1HFY2023.
A Bloomberg analyst consensus estimates project MAHB reporting a net profit of RM775.9 million for FY2024 compared with RM543.2 million in FY2023.
In a Sept 13 report, MIDF Research says a full recovery in passenger traffic in Malaysia may be delayed due to recent challenges faced by some airlines, including delays in aircraft deliveries and a shortage of parts and labour.
“In 1H2024, total seat capacity recovery hit 85%, with the average load factor rising to 79%. A quick review of July 2024 passenger traffic numbers revealed a strong 92% recovery, fuelled by the international sector, which has been outperforming the domestic sector since November 2023. Supporting this recovery is the return and introduction of foreign airlines,” says MIDF Research, which recommends that minority shareholders accept the privatisation offer.
The number of airlines serving Malaysia currently stands at 71, surpassing the 2019 pre-pandemic figure of 69, with five more airlines expected to commence operations by the end of the year.
Bloomberg data shows that four of 17 analysts covering MAHB are urging minority shareholders to accept the offer of RM11 per share. Two others are saying to buy the stock right now, while 11 are calling a “hold” on it.
The median price target of RM10.89 is at a 4% premium to Friday’s closing price of RM10.48. The stock has risen 42% since the start of the year.
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