MAHB Earnings Preview: Air Travel Recovery Gains Momentum While Investors Focus on Privatization

According to the analyst rating feature on moomoo, there have been ratings from 12 analysts, of which 33% have given a 'Buy' rating, and 58% have given a 'Hold' rating.

Kenanga anticipates that the number of tourists to Malaysia will reach 27 million in CY24, marking a 35% increase from the 20 million recorded in CY23, and surpassing the pre-pandemic count of 26.1 million in CY19. The upturn is attributed to a rise in demand for both business and leisure air travel. Such an estimate is in line with Tourism Malaysia's target of 27.3 million. The projected influx is likely to bolster the earnings growth for Malaysia Airports in 2024.

Malaysia Airports has announced that around 14 new airlines are scheduled to begin flights to Kuala Lumpur over the coming two years. Out of these, around five airlines have already launched their services to the capital in the first quarter of 2024.

“This catalyses the recovery of international traffic, particularly with the expected arrival of airlines such as British Airways, Qantas, Air India, Lufthansa, Iberia and Finnair in the coming quarters,”MIDF said. “Their entry is expected to further stimulate non-ASEAN travel,” it added.

The celebration of Aidilfitri significantly spurred the rebound of both international and domestic air travel as airlines continue to focus on expanding seat capacity to visa-free countries. MIDF has highlighted that as of April 2024, passenger traffic at Malaysia's airports hit 7.6 million, indicating an overall recovery of 86%, with domestic and international travel recuperating to 85% and 88%, respectively.

Malaysia Airports has stated that the prospects for 2024 are "very bright," largely due to Malaysia's implementation in last December of a visa-free entry policy for citizens of China, India, and several Middle Eastern countries, permitting them a stay of up to 30 days. China and India rank as Malaysia's fourth and fifth largest tourist source countries.

"The China market has shown the strongest recovery post-pandemic with more than 140% recovery in terms of weekly frequencies," says Malaysia Airports. "ASEAN and Middle East markets are also almost reaching pre-pandemic levels, although Central Asia and Africa are still lagging in terms of recovery."

Khazanah Nasional Bhd., Malaysia's sovereign wealth fund, alongside Employees Provident Fund (EPF), Global Investment Partners (GIP), andAbu Dhabi Investment Authority (ADIA), proposed an acquisition of a 67% stake in the company at a rate of RM11 per share on 15th May. This offer reflects a 15% premium over the company's three-month volume-weighted average share price, a metric indicating the stock's valuation, and puts Malaysia Airports' worth at RM18.4 billion ($3.9 billion). Following the proposed acquisition, Khazanah will increase its shareholding in the airport operator to 40%, and EPF will up its stake to 30%. GIP and ADIA, based in New York, will jointly acquire the remaining 30%.

Upon completion of the acquisition, the company will be delisted from the Kuala Lumpur Stock Exchange in the fourth quarter. The consortium seeks to achieve "long-term sustainable growth" for Malaysia Airports by upgrading airport infrastructure, enhancing service levels, and improving aviation connectivity.

"These objectives will be best achieved by MAHB as a private entity, taking a long-term approach to decision-making and capital investment and benefitting from international technical expertise," the group of investors said in the statement.

However, the transaction still faces challenges. On one side, some analysts believe the valuation is too low. NORTHCAPE Capital remarked that an attempt by major shareholders to privatize Malaysia Airports might encounter resistance because of the modest valuation proposed.

On another front, the Malaysian government is urged to exclude a BlackRock-owned entity from the buyout of its main airport operator, as BlackRock is acquiring GIP. Critics are raising concerns about BlackRock's involvement due to its significant investments in arms manufacturers that supply Israel, a nation currently in conflict with Gaza. Malaysia has been a prominent advocate for Palestine since the conflict in the besieged territory escalated last October.