News   MAHB announced that its associate company in Maldives, GMR Male International Airport Private Limited (GMIAL) had received a letter from the Ministry of Finance and Treasury of Republic of Maldives (MoFT) notifying that the Ibrahim Nasir airport concession agreement between GMIAL and the government is now void. 

  

Comments   This is a negative surprise as the Maldives airport has just started to contribute positively to MAHB's earnings in the recent quarters with accumulated associate profits of RM41m. We opine that it will be a tough battle for MAHB to reverse the new government's decision as the concession contract was signed with the previous government. 

 There was no specific reason mentioned in the announcement with regards to the cancellation. We do not discount that the cancellation could be possibly due to the inadequacy of the concession agreement's terms and conditions. To recap, the privatisation of Ibrahim Nasir airport by GMIAL was done on an open tender basis organised by International Finance Corporation. To date, MAHB has invested up to RM21m in the associate company. GMIAL is a 22:77 JV company formed by MAHB and GMR Infra (a company based in Bangalore, India with its main operations being the manager and contractor of infrastructure and power projects).

  

Outlook  We do not expect a positive outcome from this event. It will be a great loss to MAHB as the airport is at the right momentum for growth in the years to come. We understand that the airport achieved c.10% or a double-digit passenger growth.   

  

Forecast  We have trimmed our FY12-13E lower by 4% as we had stripped out the airport contribution ahead the final outcome of the cancellation issue above.    

  

Rating    Maintain OUTPERFORM

 We are maintaining our OUTPERFORM recommendation as the stock still offers an attractive upside of +24% from the current price. 

  

Valuation   We have lowered our TP from RM6.66 to RM6.42  following our earnings revision above.  Our TP is based on SOP valuation.  

  

Risks  Potential exceptional and realised loss for its investment in Maldives.   

Source: Kenanga