MAHB’s disposal of stake in GHIAL a positive move

KUCHING: Airports Holdings Bhd’s (MAHB) disposal of stake in GMR Hyderabad International Airport Ltd (GHIAL) has been viewed by analysts as positive.

In a filing on Bursa Malaysia, MAHB’s board of directors announced that the group together with wholly owned subsidiary, MAHB (Mauritius) Private Ltd (MAMPL) had on February 2, 2018 entered into a share purchase agreement (SPA) with GMR Airports Ltd (GMR Airports) for the disposal of all of the 41.58 million equity shares of 10 rupees each which represents 11 per cent of the total issued and paid-up share capital of GHIAL to GMR Airports.

The disposal was for a cash consideration of US$76.05 million (approximately RM295.34 million) subject to the terms and conditions contained in the SPA.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was positive on the disposal as it allows MAHB to unlock the group’s previously un-revalued financial asset at an attractive sale price of US$76.1 million (RM295.3 million) which also implies a trailing price earnings ratio (PER) of 15.6-fold or price to book value (PBV) of 14.6-fold.

This was based on Hyderabad’s ended (FYE) March 2017 earnings of RM172 million and net book value (NBV) of RM183.7 million.

“Furthermore, the disposal would bring down net gearing by eight per cent to 0.38-fold, from 0.43-fold as of the third quarter of 2017 (3Q17), and allow MAHB to reduce finance costs by circa RM12 million per annum moving forward should the proceeds be used to pare down debts,” it said.

Kenanga Research believed MAHB is more inclined to pare down debts instead of paying out special dividends from this disposal given that they have a Senior of RM250 million due in September 2018.

“Notwithstanding that, historically, they do not pay out higher dividend or special dividends, such as back in 2015 after he disposal of their 10 per cent stake in Delhi International Airport for RM292 million.”

The research arm noted that the Hyderabad Airport was previously parked under ‘Available for sale financial asset’ within MAHB’s balance sheet whereby it was recorded at cost since investment in 2002.

For financial year 2018 (FY18), Kenanga Research targeted a milder Malaysian growth of eight per cent, versus 10 per cent in FY17. This was due to lower seat capacities by key airlines Malindo and MAB and weaker currency advantage from the stronger ringgit.

“We are optimistic on the recovery of Turkey from the negative streak of events, which shook Turkey since early FY16, and we are targeting a double-digit growth target of 10 per cent for their Turkey operations in FY18,” the research arm said.

Post disposal, Kenanga Research increased its FY18E net profit by 94 per cent to RM570 million, from RM315 million previously, after imputing gains on disposal of RM255.1 million.

That said, the research arm maintained its FY17E and FY18E core net profit of RM245 million and RM315 million, respectively, as it deemed the disposal as a non-core profit.

“Note that we did not impute any interest savings for FY18 as we only expect interest savings to only kick in from FY19 given that the transaction will likely conclude in end 2018.”

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Source: Borneo Post Online

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