Highlights/ Comments

• MAHB announced the disposal of 11% stake in GMR Hyderabad International Airport (GHIAL) in India to GMR Airports Limited for a cash consideration of US$76.05m (c. RM295.34m).

• The disposal represents a great opportunity for MAHB to unlock value on its foreign investment. Recall that MAHB’s initial investment back in 2002 was c.RM40.2m, indicating a profit on disposal of c.RM255.1m. Over the years, MAHB has not recognized any profit contribution or dividend payments from GHIAL.

• The exercise is expected to complete in April 2018 and the proceeds from the disposal will be used to fund MAHB’s internal working capital and capex.

• We are relatively positive on the disposal exercise, where MAHB is realizing a 6-fold gain on its initial investment of RM40.2m or 13.3% IRR.

• MAHB is also in talks with various parties to partially divest its 100% stake in Istanbul Sabiha Gokcen International Airport (ISGA) in Turkey. MAHB will still remain as the major shareholder of ISGA. The expected turnaround of ISGA in 2018 will further enhance its valuation. We have valued ISGA at c. RM1.9bn vs. MAHB’s last valuation of EU€712.5m (RM3.6bn) back in 2014.

• A partial disposal of ISGA will further improve MAHB’s cash flow for domestic capex and potentially higher dividend payout for shareholders.

Risks

• World crisis (ie. war, terrorism and epidemic outbreak); shutdown of KLIA and KLIA2; and the development of high speed train between Singapore and KL.

Forecasts

• Unchanged.

Rating

BUY ↔

• MAHB is expected to be the major beneficiary from the recovery of air travel demand in Malaysia as well as on going land development initiatives (under KLIA Aeropolis Masterplan). The potential partial divestment of ISGA will further improve MAHB’s valuation.

Valuation

• We maintain our BUY recommendation with unchanged TP RM10.00 based on DCF.

Source: Hong Leong Investment Bank Research - 5 Feb 2018