GMR-MAHB consortium’s Male airport job to cost US$373m

Malaysia Airports Holdings Bhd (MAHB) yesterday announced that the construction cost of its earlier announced project for the rehabilitation, expansion and modernisation of the Maldives’ Male International Airport is estimated to be US$373 million (RM1.21 billion).

MAHB had on June 25 announced that its partnership with India’s GMR Infrastructure Ltd (GMR-MAHB consortium) had won the bid to build, operate, modernise and expand the airport.

In another statement yesterday, MAHB said the consortium had last Monday entered into a concession agreement with Maldives Airport Company Ltd and the Maldives government for the rehabilitation, expansion, modernisation, operation and maintenance of the airport.

It had been announced earlier that the concession agreement was for a 25-year period.

MAHB said the construction of the airport was expected to start by the middle of next year and be completed by July 1, 2014.

MAHB has partnered with the GMR group since 2002. MAHB currently has an 11% stake in the Rajiv Ghandi International Airport in Hyderabad, a 10% stake in Indira Ghandi International Airport in New Delhi and a 20% stake in Sabiha Gocken International Airport in Turkey.

MAHB said the parties to the consortium for the project in the Maldives were in the process of discussing the terms and conditions of the JV arrangement as well as the financing for the investment.

“Hence, the financial effects on the earnings per share, net assets per share and gearing of MAHB group cannot be determined at this point of time,” it said.

Analysts expect contribution from its overseas airport operations to be minimal in the near term given that the gestation period was expected to be between three and five years before it could generate a stable income.

Its overseas operations aside, Kenanga Research noted a stronger passenger flow in April. “At present, the management is looking to achieve a 10% passenger growth in 2010 as reported. The strong traffic growth will definitely yield a positive impact to its retail segment,” it said.

“In the meantime, we have not imputed any overseas business operations into our valuation while being more optimistic on higher passenger movements and its existing domestic business.

“The higher traffic growth in April prompts us to revise our passenger movement growth assumptions from 3% to 5% in FY10 on the back of resilient air travel demand from the Asia-Pacific countries,” it added.

While maintaining its trading buy call on MAHB, Kenanga recently upped its target price for the stock to RM5.83 from RM5.65.

In a note yesterday, the research house also revised its earnings forecast upwards by 3% for FY10 and FY11 after imputing higher passenger growth at 5% for FY10 from 3% previously while pegging a 16 times PE FY10 to derive the new target price at RM5.83.

Kenanga also noted that following the project award in the Maldives, MAHB is looking to secure the expansion work for Prince Mohammed Bin Abdulaziz Airport (Medina) in Saudi Arabia through a consortium. “The total worth of the project is estimated at RM4.9 billion and expected to be completed by 2016,” it said.

MAHB added one sen yesterday to close at RM5, with 395,500 shares done.


This article appeared in The Edge Financial Daily, July 1, 2010.