Friday 29 Mar 2024
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KUALA LUMPUR (Aug 14): The depreciation of the Turkish lira is expected to have a mixed impact on Malaysia Airports Holdings Bhd (MAHB), negative for IHH Healthcare Bhd and mildly negative for Tenaga Nasional Bhd (TNB), according to Hong Leong Investment Bank Research (HLIB).

In a strategy report today, HLIB analyst Jeremy Goh pointed out that despite the expected impact from the Turkish lira, the research house has a buy call for MAHB and Tenaga but a hold recommendation for IHH.

MAHB's exposure in Turkey is through the ownership of Istanbul Sabiha Gokcen International Airport (ISG) as its revenue collection, through passenger fees, is in euro while cost is in the local currency.

"As of 1QFY18, ISG was still in red but we expect it to turn profitable for the full year FY18. The impact on passenger movement is hard to gauge as the expected lower passenger movement from the locals (due to lira's depreciation) may be offset by the expected higher tourists arrivals (cheaper to visit Turkey)," Goh said.

He noted that the possible negative would be the weaker lira could deter potential Turkish buyers for part of MAHB's stake in ISG, as the price tag is likely to be denominated in euro.

Last week, Bloomberg reported that Turkish Airlines was bidding to buy an 80% stake in ISG from MAHB.

IHH, which has a 60% stake in Acibadem, operates 21 hospitals and 16 medical centres mainly in Turkey, and the weakened lira would negatively impact Acibadem on its non-lira borrowings (about US$125 million and €330 million) as well as the lower earnings contributions from Acibadem to IHH upon conversion of the lira's proceeds to ringgit.

"Our lira-ringgit assumption for FY18 is 1.10. However, assuming that the exchange remains at 0.60, our sensitivity calculations imply that their FY18-20 earnings would be impacted by 10% to 18%," Goh said, noting that the group has in place several measures such as delaying capital expenditure (capex) in Turkey and rationalising some of Acibadem's non-core assets to reduce the non-lira borrowings.

As for TNB's exposure in Turkey, HLIB pointed that a decline in lira would negatively impact GAMA Enerji, a 30%-associate of TNB via its US dollar-denominated loans, but given the earnings base of TNB of more than RM8 billion, the research house does not envisage a significant impact from the impairment risk.

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