MAHB slips 2.4% on Turkish airport dilemma, weak passenger volume

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KUALA LUMPUR (Sept 17): Malaysia Airports Holdings Bhd (MAHB) slipped as much as 2.4% after an offer was made to buy a 40% stake in Turkish airport Istanbul Sabiha Gokcen (ISG), which MAHB does not control, for €285 million or RM1.19 billion.

As at 3.30 pm today, MAHB lost 17 sen or 2.2% to RM7.45. The fifth top loser saw trades of some 1.7 million shares. It had earlier fallen to a low of RM7.44.

Analysts said MAHB may have to fork out more cash if the airport operator decides to exercise its right of first refusal (ROFR) by taking up the 40% stake instead.

Earlier this week, Turkey-based global airport operator TAV announced it had signed the share purchase agreement with Limak Group to buy the latter’s 40% stake in ISG.

Analysts said TAV's acquisition would give it Limak’s veto power over all of the business decisions of ISG, which might result in management paralysis, as MAHB also wielded a similar veto power.

Today, an aviation analyst told theedgemalaysia.com that MAHB might need to fork out some RM1 billion to fully acquire ISG.

“Because of this, we think that investors are being cautious,” he told over the telephone.

In a note Monday, CIMB Investment Bank Research’s analysts Gan Jian Bo and Raymond Yap said if MAHB decided to exercise the ROFR, an equity issue would be the most likely scenario to occur.

The pair said at the current share price, an equity issue would boost MAHB’s share base by 11% to 155 million shares.

"MAHB has a lot of incentive to exercise its ROFR to buy over Limak’s stake and prevent TAV’s entry.

“However, MAHB cannot debt-finance the RM1.19 billion price tag for Limak’s 40% stake as it runs the risk of breaching its debt covenant of not more than 125% gross debt-to-equity,” said Gan and Yap.

The CIMB IB analysts maintained a "hold" call on the stock with an unchanged target price of RM7.20.

Apart from the Turkish airport issue, the aviation analyst added investors’ cautious stance could be due to weaknesses seen in passenger volume in domestic airports, following restructuring developments in flag carrier Malaysian Airline System Bhd.

Furthermore, he said the spike in expenses at klia2 could also be a contributing factor.