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RAM Ratings affirms MAHB’s senior debt ratings at AAA/Stable
Published on 13 Sep 2024.
RAM Ratings has affirmed the ratings of Malaysia Airports Holdings Berhad’s (MAHB or the Group) sukuk facilities (Table 1).
The affirmations are premised on (a) our view that MAHB’s financial profile will improve to pre-pandemic levels over the next two years on the back of strong passenger traffic growth; (b) execution of new Operating Agreements (OAs) with the Malaysian government in March 2024 that are largely favourable to MAHB and removes the uncertainties weighing on it previously; and (c) high likelihood of extraordinary government support for the Group if necessary, uplifting MAHB’s standalone rating.
Over the review period, passenger movement at MAHB’s Malaysian airports jumped 55% y-o-y to 81.90 mil in 2023 before rising 16% to almost 45 mil in 1H 2024 (88% of 1H 2019 level). Meanwhile, the Group’s Sabiha Gokcen International Airport in Türkiye saw traveller numbers spurt 21% to an all-time high of 37.60 mil in 2023 to exceed pre-pandemic levels, advancing another 16% in 1H 2024 to 20.0 mil. Accordingly, MAHB’s OPBDIT almost doubled to RM1.8 bil last year and improved 33% in 1H FY Dec 2024, aided further by continued improvement in core cost per pax. OPBDIT is anticipated to close at circa RM2 bil this year and between RM2.1 bil and RM2.3 bil in the subsequent two years. Sturdy travel demand will moderate the downside risks posed by supply chain-related issues currently besetting airline companies, including Malaysia Aviation Group.
The robust passenger traffic in Asia Pacific over the next few years will allow the Group to sustain current healthy credit metrics. We expect adjusted funds from operations debt cover at above 0.30 times and gearing at a healthy 0.5 times to 0.7 times (FY Dec 2023: 0.29 times and 0.7 times, respectively). Our projections incorporate more conservative domestic passenger traffic levels that are 3% to 8% lower than previous forecasts, while MAHB’s debt load will ease from RM5.4 bil (end-June 2024) to circa RM4.0 bil by 2026 based on existing capital expenditure (capex) plans. Strong internal cashflows are expected to adequately cover capex needs in the next few years.
Meanwhile, the new OAs extend MAHB’s sole operatorship of all 39 existing airports in Malaysia until February 2069, affirming its dominant position. We view the terms of the OAs to be favourable to MAHB, with flexibility for the Group to undertake airport investments with reasonable returns, should it choose to. The mechanism for compensation to MAHB should actual passenger service charges fall below benchmark rates – a key feature under the previous OAs and an important rating consideration – is now less onerous, while all other compensation mechanisms have been retained.
The strategic move to privatise MAHB, to enhance connectivity of the Group’s local airports as well as to address underperformance of inbound traffic growth and underinvestment in airport upgrades, has the backing of the government. The privatisation offer, if fully accepted, will see collective government interest in MAHB (via Khazanah Nasional Berhad and the Employees Provident Fund) increasing from 41% to 70%, with Global Infrastructure Partners bringing industry experience in airport management to the partnership. While business will remain unchanged for now, ambitions to enhance Malaysia’s aviation connectivity under the new consortium may entail changes to MAHB’s future strategic and financial plans.
Analytical contacts
Karin Koh, CFA
(603) 3385 2508
karin@ram.com.my
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
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