Malaysia Airports Holdings Bhd
(Sept 9, RM5.40)
Maintain buy at RM5.40 with revised target price of RM6.63 (from RM6.12): MAHB announced on Aug 30 that it has issued a 10-year tenure sukuk worth RM1 billion with a profit share rate of 4.55%. This is the first tranche (of up to RM3.1 billion, second tranche circa RM1.5 billion, possibly 1Q11). We have raised our forecastsimputing the interest savings and taking into account other recent developments. Maintain buy, with a new discounted cash flow (DCF)-based RM6.63 target price.
We initially estimated a coupon rate of 5.5% in our model. If MAHB succeeds in raising a further RM1.5 billion at the same rate (as suggested by the forward yield curve), a savings of RM238 million for the entire sukuk could be generated. The NPV of interest cost savings adds 15 sen to our target price.
Following further management discussions, we have tweaked our model to take into account lower incentives paid to airlines, lower MARC [(marginal cost support) is compensation by the government for legacy non-commercial contracts with regard to the airport operations] compensation from the government, and lower staff costs and overheads. We have revised our earnings forecast by -2% to +4%. The result is higher cashflow from operations of +1% over the next 10 years.
The management has revealed that the aero-train (train to shuttle passengers from main terminal building to satellite building) is undergoing a heavy maintenance and upgrades. This project (Spurline Project) is estimated to cost RM209 million and will be imputed in 2010-2011 capex.
We have updated our DCF valuation after adjusting for lower debt cost (reducing WACC), higher capex and lower net debt (due to 2Q10’s strong performance). Our new target price of RM6.63 makes MAHB highly attractive compared to global peers: 7.8 times P/CFO (24% discount to peers), 11% ROC (53% higher) and 3.2% dividend yield (48% premium). — Maybank Investment Bank Bhd Research, Sept 9
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