KUALA LUMPUR – The Malaysian Aviation Commission (Mavcom) should set a reasonable tariff rate, given the urgency for airport expansion and maintenance capital expenditure (capex) in Malaysia, said Kenanga Investment Bank Bhd (Kenanga).
The research house said that, among other things, a reasonable tariff rate would enable Malaysia Airports Holdings Bhd (MAHB) to accumulate the required cash for capex purposes.
In its First Consultation Paper on the Long-Term Framework for the Regulation of Aviation Services Charges, Mavcom has proposed to implement a long-term framework to regulate aviation services charges for all aerodromes in Malaysia.
The commission has also proposed to keep the airport tariffs status quo, held constant in real terms by inflating charges each year using the consumer price index, to be applied during Regulatory Period 1 in 2023 to 2025.
“We are concerned as this could work against MAHB’s ability to generate enough cash flow for capex purposes, particularly for airport expansion and maintenance.
“While the proposals in this Mavcom consultation paper are not cast in stone, they do significantly raise MAHB’s earnings risk over the short to medium term, prompting us to downgrade our rating on MAHB and the aviation sector,” Kenanga said in a research note today.
Given the circumstances, the research firm has downgraded its call on MAHB from “outperform” to “market perform” and reduced its forecast on MAHB’s financial year 2023 forecast net profit by 10% based on its expectation of lower passenger numbers.
“Correspondingly, we downgrade our target price for MAHB shares from RM7.65 to RM6.05,” it added. – Bernama, August 15, 2022
