KUALA LUMPUR (Oct 24): RHB Investment Bank Bhd said today Malaysia's proposed lower passenger service charge (PSC) may be earnings neutral for Malaysia Airports Holdings Bhd (MAHB) because the PSC reduction should be offset by lower user fees payable by MAHB to the government.

RHB analyst Alan Lim wrote in a note today the new regulated asset base (RAB) framework will be announced soon with a lower PSC for almost all commercial airports in the country.

"We believe the news is positive, as they eliminated the speculation that the RAB framework will be removed. We reiterate our view that a lower PSC will likely be earnings neutral, as it should be offset by lower user fees payable to the government," Lim said.

For now, RHB maintained its "buy" recommendation on MAHB shares with a target price (TP) of RM9, according to Lim. At Bursa Malaysia today, MAHB's share price fell eight sen or 1% to RM7.91 at 11:46am among the bourse's top decliners.

"Pending the final outcome of the RAB, we maintain our FY19F-21F earnings. Risks to our recommendation and TP include weaker passenger traffic, an unfavourable outcome of the RAB framework, a negative outcome from ongoing court cases, and sharp depreciation of the TRY (Turkish lira).

"The sell-down (of MAHB shares) has lowered the (stock's) valuation to 22.5x FY20F P/E, or -0.95 SD (standard deviation), which means that most of the negatives have already been priced in," he said.