MAHB to decide on final sukuk proposal in 3 months

By Bhupinder Singh

Malaysia Airports Holdings Bhd (MAHB) will only know how much of the RM3.1 billion proposed sukuk issue it will take up to help finance the building of the new low-cost carrier terminal (LCCT) project when it has completed awarding all the contracts in the next two to three months.

The airport owner and operator's management indicated that it initially proposed a RM2.5 billion issue to finance the construction of the new LCCT or KLIA2 building but with a credit rating of AAA for the issue, its financial advisors said it could tap the markets for as much as RM3.1 billion without any deterioration to the rating.

Managing director Tan Sri Bashir Ahmad Abdul Majid said part of the money raised from the sukuk would also be used to repay/service its short-term borrowings while new projects like the US$350-400 million (RM1.11-RM1.26 billion) Male airport expansion in Maldives and the outcome of the bid for Prince Mohammed Abdulaziz Airport in Medina, Saudi Arabia, could have a barring on the issue size.

Meanwhile, the 17.77% rise in passenger movement to 27.74 million for the first-half of the year, however, was not able to offset rising staff costs and loss at associate company Sabiha Gokcen International Airport Ltd as MAHB's net profit fell 14% to RM132 million for the financial period ended June 30, 2010 as compared to RM153 million in the same period last year.

Revenue for the six-month period rose 11.4% to RM872.12 million driven by recovery in air travel demand and higher sales and profits from its retail operations and rental and royalty charges.

The management expects the second-half period to remain strong with tourist arrivals from the Middle East helping to sustain its aeronautical operations aided by more new carriers using airports operated by MAHB, according to Bashir Ahmad.

He expects passenger growth of 10-12% for the full year and good financial prospect for the second-half of the year due to sustained demand for its services and facilities. International passenger movement rose by 12.7% in the six-month period, outgrowing domestic movement which expanded by 9.78% partly due to the fact that international passenger arrivals to regional airports like Kota Kinabalu and Penang rose 43.7% as a result of more direct flights to these airports by various carriers, he said.

The company, he added, is seeking to attract another two carriers to have flights into the country by the end of the year, without giving any names. CFO Faizal Mansor said MAHB's balance sheet is healthy with its gearing level at 0.27 times, cashflows of about RM50-60 million a month while annual operational capital expenditure to stand at about RM200 million.

(This story, written by Bhupinder Singh, appeared in The Malaysian Reserve on August 18, 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh) Any source