KUALA LUMPUR (May 16): Shares in Malaysia Airports Holdings Bhd (KL:AIRPORT), or MAHB, did not fare well on Thursday, folllowing news of a privatisation offer at RM11 per share led by a consortium of its major shareholder Khazanah Nasional Bhd and the Employees Provident Fund (EPF).

MAHB opened 30 sen or 2.9% lower at RM10.10, before dropping to an intraday low of RM10. At the closing bell, the counter was down 36 sen or 3.46% at RM10.04, giving the airport operator a market capitalisation of RM16.75 billion.

The stock was the day's second biggest loser in terms of value on Bursa Malaysia. However, it was still up 36.41% year-to-date.

“Investors do not buy the privatisation idea. I have no clue [why they want to privatise MAHB],” Endau Analytics founder Shukor Yusof told The Edge when contacted.

“I can't see how privatisation can help make the KLIA (Kuala Lumpur International Airport) a better airport or improve connectivity, simply because Kuala Lumpur is not a major city in Asean like Singapore or Bangkok. And this privatisation idea has been drummed up without much thought on how MAHB can be the agent of change for the aviation industry in Malaysia,” he added.

The joint offerors consisting of Khazanah, the EPF, New York-based Global Infrastructure Partners (GIP) and Abu Dhabi Investment Authority (ADIA) — via a consortium dubbed Gateway Development Alliance Sdn Bhd (GDA) — intend to undertake a conditional voluntary offer to acquire all the remaining 1.12 billion shares in MAHB not already held by them at RM11 per share in cash. They also intend to delist MAHB.

The offer, subject to approvals from the Malaysian Aviation Commission (Mavcom), Turkish Competition Authority, General Authority for Competition of Saudi Arabia and Egyptian Competition Authority, is expected to be completed by the fourth quarter.

Upon completion of the offer, Khazanah will be raising its stake in MAHB to 40% from 33.2%, and the EPF from 7.9% to 30%. The remaining balance 30% will be owned by ADIA and GIP.

Out of the 14 analysts covering MAHB, seven had ‘buy’ calls on the stock, six had ‘hold’ ratings, while only one had a ‘sell’ call. The 12-month target price stood at RM10.26, Bloomberg data showed.

Minority shareholders advised to accept buyout offer, though offer price may be revised higher

Local research houses, namely Kenanga Investment Bank, TA Securities, MIDF Amanah Investment Bank and Hong Leong Investment Bank, have all advised minority shareholders of MAHB to accept the buyout offer.

According to Kenanga, the offer price of RM11 per share translates into 26 times earnings per share (EPS) estimated for the financial year ending Dec 31, 2025 (FY2025), and 20 times the consensus FY2025 EPS. This represents a discount of 26% to 42% to the stock’s closest listed peer, Airports of Thailand, which trades at 35 times consensus FY2025 EPS.

“We believe the price-earnings ratio valuation discount to the closest listed peer, Airports of Thailand, makes sense considering that Thailand’s tourism revenue is three times larger than that of Malaysia,” said Kenanga in a note to clients.

Meanwhile, MIDF commented: “The deal puts the valuation at 9.2 times/7.6 times enterprise value/earnings before interest, taxes, depreciation and amortisation for the actual FY2023 and forecast FY2024 respectively, which we consider reasonable."

In addition, MIDF expects substantial capital expenditure in the upcoming years for airport expansion and development, potentially leading to a delay in earnings realisation, especially given the uncertainties surrounding the regulatory landscape.

Meanwhile, CGS International noted that if the GDA consortium is unable to achieve a minimum 90% stake in MAHB, it may be willing to raise the offer price to above RM11 a share.

“We think GDA may be willing to pay higher, as it could be taking a longer-term view of the potential of MAHB and the ISG (the Istanbul Sabiha Gökçen International Airport), including improving long-haul traffic connectivity at the Malaysian and Turkish airports, upgrading operations, enhancing the passenger experience, and growing the airports’ capacities,” said CGS.