Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on February 24, 2020

Malaysia Airports Holdings Bhd
(Feb 21, RM6.75)
Maintain hold with an unchanged target price of RM7.47:
Last Tuesday, the Singapore government announced a S$112 million (RM335.69 million) Aviation Sector Assistance Package, co-funded by the government, Civil Aviation Authority of Singapore (industry regulator) and by Changi Airport Group (CAG), the airport operator, in order to assist airlines affected by the Covid-19 outbreak.

Measures included 100% landing charge rebate/credit for flights from China to Singapore, 10% landing charge rebates for flights from Asean to Singapore, 100% parking charge rebate for all flights, and a six-month waiver of the planned 1% annual increase in aeronautical charges that was scheduled to take effect on April 1. This means the CAG will bear some of the costs related to assistance given to the airlines.

Airports of Thailand PCL (AOT) yesterday announced that it will offer discounts to help retailers at its Thai airports. AOT reserves the right to cancel or modify the assistance if the Covid-19 outbreak subsides.

AOT’s scheme includes: i) providing a 20% discount on fixed rent for one year from February until January 2021, extendable by one more year until March 2022; ii) exempting concessionaires from paying minimum guarantees and only charging them a share of actual revenues for up to two years between February 2020 and March 2022; and iii) potentially extending concession fee waivers for another six months upon request. During the 2003 severe acute respiratory syndrome crisis, the Malaysian government announced: 1) a 50% cut on landing and parking fees for flights operated by foreign airlines into the Kuala Lumpur International Airport for a period of one year; and 2) a 50% discount on rental rates for duty-free shops and other outlets at airports for seven months. These incentives were borne by Malaysia Airports Holdings Bhd (MAHB).

Assuming a 50% cut on landing and parking fees and on rental rates for six months from March to August for all airlines and all airports, MAHB’s forecasted financial year ending Dec 31, 2020 (FY20F) revenue and profit may be cut by up to RM250 million, which represents a 52% negative impact to the Malaysian operations’ current core net profit forecast of RM477 million, and a 35% negative impact to our current group FY20F core earnings forecast of RM712 million, depending on the details of the package that may be offered by MAHB next week.

Our forecast remains intact for now. — CGS-CIMB Research, Feb 20

      Print
      Text Size
      Share