This article first appeared in The Edge Financial Daily on March 26, 2019

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) became the selling target yesterday. Its share price plunged as much as 10.3% to an intraday low of RM6.90 but it managed to recoup some losses to close at a two-year low of RM7.33.

Investment analysts were puzzled with the fierce selling given that most of them, who track the airport operator, are recommending the stock to clients.

According to Bloomberg data, the counter has 14 “buy” calls, six “hold” calls, and one “sell” call, with consensus target price (TP) at RM9.33.

Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng commented that investors could be overreacting to the news flow, which he cautioned that several uncertainties have cast a shadow on the airport operator.

“There are some uncertainties surrounding MAHB, as the government is looking into new ways to operate airports in Malaysia, [and] there is also this RM400 million litigation between MAHB and AirAsia X Bhd,” said Ang.

The news flow related to MAHB has been non-stop in recent months. It started off with the proposal in Budget 2019 on [the] setting up [of] an airport real estate investment trust, followed by Transport Minister Anthony Loke indicating that the government was mulling lowering the passenger service charge (PSC) to make air travel more affordable. The airport operator later got into a legal dispute with AirAsia X.

The most recemt news is that the government has confirmed allowing a third party to build and operate a new airport in Kulim, Kedah. Such news is perceived by some quarters as a move to liberalise the airport management business, which is currently dominated by MAHB.

Meanwhile, MAHB is in the midst of negotiating with the government for a regulatory asset base framework, which would outline a new ceiling price for the PSC that commensurates with the required capital expenditure by the airport operator in future.

Yesterday, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali stressed that the government can no longer afford to build airports even though there is a need for them. “With participation of the private sector, we need to have a new framework to regulate their participation in developing airports,” he said.

However, Maybank Investment Bank aviation analyst Mohshin Aziz pointed out that MAHB’s share price has not moved much last week when the government announced that it would allow the private sector to build a new airport in Kulim.

“It was strange ... many people have called to ask me about the sudden selldown,” said Mohshin when contacted but he added that there was no new selling impetus yesterday.

MAHB share price has been dropping since August last year, down 25% from a high of RM9.80. The average TP among the analysts covering the stock is RM9.33, 27% upside from the current level.