KUALA LUMPUR: The implementation of Malaysia Airports Holdings Bhd’s (MAHB) proposed regulated asset base (RAB) framework will likely be deferred, and perhaps outrightly cancelled, some analysts said.
This follows the integration of Malaysian Aviation Commission (Mavcom) into the Civil Aviation Authority of Malaysia (CAAM).
RAB is the funding mechanism for MAHB to spend on local airports development within the regulated period, allowing the airport operator to recoup its capital expenditure (capex) for airports development or upgrade.
An analyst at Affin Hwang Capital expects a prolonged deferment of the RAB implementation as Mavcom was focusing on its staff welfare and handover process before being dissolved.
This is despite Transport Minister Anthony Loke’s recent statement that the merger would not affect the framework implementation.
“Taking into consideration the proposed CAAM-Mavcom merger and Mavcom’s press release, where its executive chairman Dr Nungsari Ahmad Radhi said he will now focus on the welfare of the staff and a responsible handover, we expect the implementation of the RAB to be deferred for the foreseeable future and see the risk of an outright cancellation as also high,” the analyst wrote in a report yesterday.
Post-merger, the analyst said CAAM might reconsider the RAB framework, but there was no clarity whether it would accept or implement the framework.
“The implementation, if materialised, will likely be several quarters away and may be subject to revisions,” he added.
In the proposed RAB framework, a rising user fee paid by MAHB to the government will be matched by a higher passenger service charge (PSC).
MAHB will also be able to recoup any capex spent and generate a return by setting the PSC, landing charges and aircraft parking charges to reflect the forecast capex.
Another analyst agreed that the merger would likely delay the RAB implementation, unless Mavcom was given the support to implement it within its six-month integration period.
“It is a wait-and-see conclusion. There is no sign as yet it will be cancelled all together,” he added.
An analyst with an international consulting firm, meanwhile, is confident that the RAB framework would be implemented as it had been tested and proven globally.
“It also ensures fair return to investors,” he added.
The analyst said investors needed assurance for investing in airport development so that they can recoup their investments.
“RAB framework has been successful in other parts of the world like in the United Kingdom. It was tested and a proven model for investors to invest in an airport comfortably.”
The analyst added that investors were typically familiar of the framework and had no problem investing in airports based on the funding mechanism.
“However, investors are unsure of the situation involving the RAB framework. That has seen MAHB’s share on a declining trend,” he said, adding that the government should make the situation clearer.
He said the decision would be dependent the government’s appetite on whether to continue implementing the RAB framework or other airport financing model.
Despite the potential prolonged RAB deferment, analysts said MAHB’s business outlook remains healthy.
Affin Hwang, however, has cut its 2020-2012 earnings per share (EPS) forecast by eight to nine per cent after reversing the financial impact of the RAB framework.
“Operationally, MAHB’s business outlook remains healthy. We expect higher passenger movements, good cost efficiencies and lower finance costs for the Turkey business to drive a 3.0-9.0 per cent growth in MAHB’s 2020-21 EPS.”
The firm kept its “hold” rating on the stock with a revised target price of RM7.50 from RM8.50 after incorporating its earnings cuts and lowering discount rate for the Malaysian operations in view of the lesser policy risk in relation to RAB.
MAHB’s share price has fallen about 20 per cent over the past three months. It closed 1.97 per cent or 14 sen to RM6.98 yesterday.