MAHB edges up on likely cash call plans

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KUALA LUMPUR (Oct 27):  Shares of Malaysia Airports Holdings Bhd (MAHH edged up at mid-morning on Monday after CIMB Research maintained its Hold rating on Malaysia Airports Holdings Bhd (MAHB) at RM7.05 with an unchanged target price of RM7.20 after the airport operator said it was reconsidering its long-held objective of defending its AAA credit rating status, which suggests that it was possibly open to a wholly/majority debt-funded acquisition of another 40% of Istanbul Sabiha Gokcen (ISG).

In a note Oct 24, CIMB Research said this meant that the issue of sukuk (both perpetual and/or senior debt) was very likely.

It said MAHB had a remaining sukuk facility of RM2 billion, and investor demand has been strong.

The research house said RM1billion would be issued to fund KLIA2 and to refinance short-term borrowings, while another RM1 billion will be available for the partial funding of the ISG purchase.

With more debt funding, less equity will be needed, hence mitigating any potential dilutive impact, it said.

“This is positive because it means that there will be less dilution from the issue of new ordinary shares, and the overall WACC can be lower.

“We maintain Hold rating and our DCF-based target price. Downside risk to the share price is limited, but weak traffic growth and KLIA2-related costs are likely to lead to uninspiring results in the coming quarters,” it said.

At 9.55am, MAHB added 1.7% or 12 sen to RM7.17 with 493,700 shares done.