MAHB’s credit profile strengthening due to stabilisation in its overseas ops and continued resilience in its domestic markets

By NG MIN SHEN / Pic By TMR

MOODY’S Investors Service has upgraded its outlook on Malaysia Airports Holdings Bhd (MAHB) to stable from negative, while also affirming the A3 issuer rating on the group.

Moody’s VP and senior credit officer Ray Tay said in a statement yesterday that the change in outlook to stable reflects the strengthening of MAHB’s credit profile due to stabilisation in its overseas operations and continued resilience in its domestic markets.

He said passenger traffic growth in 2018 will continue to benefit from stabilisation of the operating environment for MAHB’s fully-owned subsidiary, Sabiha Gokcen International Airport (SGIA), which owns and operates the second-largest airport in Istanbul, Turkey.

Tay said the operations had faced uncertainty following the failed coup attempt of July 2016, as well as the occurrence of terrorist attacks.

The stable outlook is also supported by the rating agency’s expectation of continued robust traffic growth in Malaysia, particularly for the higher-yielding international passenger segment which grew 14.1% in 2017.

Moody’s base-case scenario conservatively assumes mid-single digit growth in total passengers for 2018 and 2019 for Malaysian operations — the key earnings contributor for the airport operator.

“Such growth assumption supports resilience in MAHB’s credit profile, should actual traffic growth taper off compared to the robust growth seen in 2017,” the bond credit rating agency said.

Even though SGIA’s 5.6% improvement in 2017 was lower than before the 2016 coup attempt, its mid-single digit growth is expected to continue over the next one to two years.

“We expect growth in 2018 to continue to be led by international passengers, who pay a much higher passenger service charge than that for domestic passengers,” Moody’s said.

It also noted that the regulatory framework for MAHB is evolving, given the ongoing negotiations regarding the extension of its operating agreement with the government, as well as uncertainty surrounding tariff determinations.

“We expect the process to be protracted, given the complexity of the issues involved, and will evaluate the credit impact as more details become available. Nevertheless, the uncertainty around the process is a credit challenge,” Moody’s stated.