BUSINESS

CGS-CIMB MAINTAINS 'ADD' CALL ON MAHB, WITH HIGHER TP OF RM6.79

01/03/2021 01:23 PM

KUALA LUMPUR, March 1 -- CGS-CIMB Research has maintained its “add” call for Malaysia Airports Holdings Bhd’s (MAHB) shares and increased its target price (TP) to RM6.79 a share from RM5.99 a share previously.

The research house said the call was made in view of the airport operator’s robust cash flow management.

“Core operational expenditures (OPEX) such as staff, utilities, maintenance and administrative costs were reduced by 26 per cent in the financial year 2020 (FY20), although it is expected to rise six to seven per cent year-on-year (y-o-y) in FY21 on the account of higher maintenance spending.

“The airport operator also succeeded in reducing the trade receivables balance in Malaysia by 41 per cent in the fourth quarter of 2020 (Q4 2020) by offering incentives to tenants and airlines to settle the amounts owing,” CGS-CIMB said in a research note today.

It also said that MAHB had also secured government assistance in the form of concession fee payment deferrals in both Malaysia and Turkey, and approval from Malaysia’s tax authorities to utilise a greater amount of tax incentives to offset future taxes.

In terms of debt financing, CGS-CIMB said MAHB has partially refinanced its maturing debt and has ample new credit lines to tap into, while the Istanbul Sabiha Gökçen International Airport has pushed back its debt principal repayments by two years.

“In our calculation, all these cash management initiatives will ensure that MAHB emerges from the COVID-19 pandemic without having to raise new equity,” it said.

The positive sentiment for MAHB to improve and help re-rate the stock was expected with COVID-19 vaccine rollouts in Malaysia and globally, it said.

“Our base-case traffic volume estimate is for an improvement in FY21 versus FY20, but we have pared down the rate of improvement significantly in this report.

“This is because the Malaysian government seems reluctant to permit interstate travel anytime soon, and we think international borders may reopen only from Q4 2021,” it said.

However, CGS-CIMB expects air travel to roar back to life in FY22, and investors who sit through the first half of 2021 patiently are expected to be well rewarded.

-- BERNAMA

 

 


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