KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) can weather the Covid-19 turbulence this year amid lower passenger volume and revenue collection from airlines.
CGS-CIMB Research analyst Raymond Yap said the success can be achieved if the airport operator rationalises its fixed operational expenditure (opex) and secures approval from the governments of Malaysia and Turkey to defer payments of revenue share and concession fees, while reducing its existing credit lines.
“We believe both governments would be supportive of MAHB’s Malaysian and Turkish operations. Airports are assets of national importance and crucial to the economic well-being of the countries involved,” he said in a report recently.
Yap expects MAHB to secure all the necessary government approvals and debt funding to survive the pandemic.
He said MAHB had identified four strategies to cope with Covid-19 including plans to reduce about 20 per cent of certain operating costs, and for suppliers to extend payment terms.
“MAHB will also defer its planned RM1 billion in capital expenditure (capex) for this year, reducing it to a bare minimum of just RM300 million comprising urgent maintenance capex,” he added.
Yap said MAHB had asked the Malaysian and Turkish governments to defer revenue sharing and concession fee payments and requested for various indulgences to increase the airport operator’s cashflow.
“MAHB may tap into its available short-term lines in Malaysia, and possibly also its sukuk programme, to raise urgent funds for opex needs.”
Yap said MAHB has RM1.2 billion of debt maturing, comprising RM1 billion of sukuk at its Malaysian business and another €45 million (RM212.08 million) at its Istanbul Sabiha Gokcen International Airport (SGIA).
“At end of 2019, MAHB had RM3.2 billion worth of cash and cash equivalents with cash making up RM1.45 billion and quoted unit trusts RM1.75 billion.
“However, the group’s cash balance had declined to RM2.7 billion by early-January 2020, after SGIA paid its annual concession fees of €115 million (RM542 million).
Therefore, he said MAHB would be short of revenue in the financial year ending December 31, 2020 (FY20) as it still has to incur substantial fixed costs.
“Revenue recorded on its profit and loss from its airline customers and airport tenants may not actually be collected in cash by MAHB, as its customers are themselves struggling with an existential cash crunch.”
The report noted that MAHB would likely take urgent action to cut its operating costs to preserve cash.