MAHB shares up as Mavcom report offers earnings certainty

KUALA LUMPUR (June 19): Malaysia Airports Holdings Bhd’s (MAHB) share price rose as much as 41 sen or 5.17% so far today to RM8.34 after the Malaysian Aviation Commission (Mavcom) published yesterday its second consultation paper on aeronautical charges framework, which is seen providing earnings certainty to MAHB via the regulated asset base (RAB) mechanism.

RHB Investment Bank Bhd analyst Alan Lim wrote in a note today that the investment bank raised its MAHB share target price (TP) to RM9.20 from RM8.15 previously due to lower beta assumptions to reflect reduced uncertainty over the RAB framework.

“We are positive on Mavcom’s proposals as it has removed a large amount of uncertainty for the RAB framework. We expect MAHB’s valuation to rerate further,” said Lim, adding RHB maintained its buy call for MAHB shares.

Hong Leong Investment Bank Bhd (HLIB) analyst Daniel Wong wrote in a note today that while the RAB provides earnings certainty to MAHB, the framework will also put a cap on the potential earnings growth of its Malaysia operations and further restructuring of the RAB structure in subsequent regulatory periods.

“We believe that RAB structure will provide allowable net profit for MAHB’s Malaysia operation at RM680-780 million for FY20-22, assuming 70% gearing ratio for the proposed new capex,” Wong said.

He said HLIB maintained its hold recommendation on MAHB shares with an unchanged TP of RM7.80.

At 10:09am, MAHB shares cut gains at RM8.33 with 302,500 units transacted. The counter was among Bursa Malaysia’s top gainers.

Source: TheEdgeMarkets