MAHB revenue up 11.5% on higher passenger traffic


Malaysia Airports Holdings Bhd’s (MAHB) revenue increased 11.5% to RM4.65 billion in 2017 as a result of its strong passenger traffic growth that was reported at all its Malaysian airports, as well as its wholly owned Sabiha Gokcen International Airport (SGIA) in Istanbul.

Moody’s Investors Service VP and senior analyst Spencer Ng said stronger financial position was also attributable to MAHB’s solid operating results for 2017.

He said MAHB’s passenger traffic grew strongly across its Malaysian airports, resulting in a 9.3% increase in aeronautical revenue.

Meanwhile, the non-aeronautical revenue — primarily composes retail and property — also improved by 10.4% in 2017 from the prior year.

On the whole, non-aeronautical activities contributed around 44.5% of MAHB’s total revenue (excluding construction revenue) in 2017.

The report added that higher revenue and a modest reduction in reported debt resulted in an improvement in the airport’s financial leverage at the end of 2017.

“Assuming no material change in the SGIA’s utilisation fee liability and MAHB’s concession-related liabilities,

we estimate the airport’s financial leverage — represented by funds from operations — at around 10.2%, compared to the minimum tolerance level of 7% to 8%,” Moody’s report stated.

Moody’s also projected MAHB’s financial leverage to remain at around 11% to 12% over the next one to two years.

The financial leverage is also expected to remain that way and will be supported by a mid-single-digit increase in passenger numbers, which will offset the incremental debt incurred to fund capital spending.

“The increase in passenger traffic will be supported by favourable tourism trends in Malaysia,” the report read.

Moody’s also said the key drivers of MAHB’s credit profile over the next two to three years would depend on the Malaysian Aviation Commission’s (Mavcom) decision over the new tariff setting rules for airports in Malaysia.

In August 2017, Mavcom announced its plan to introduce a cost-based mechanism that would serve as a long-term methodology for setting aeronautical charges for commercial airports.

“We believe Mavcom’s decision over key inputs, such as the regulated asset base and the allowed return on capital invested, will ultimately determine the impact of the new rules on MAHB’s revenue and cashflow,” Moody’s report stated.

A number of other regulatory parameters are also being considered, such as the adoption of a revenue cap or a tariff cap, which could all affect the airport’s exposure to passenger volume and profitability in the future, after the new rules are implemented.

“Given the range of parameters being considered, the credit impact from the new rules will remain unclear until more information is announced by the regulator,” said the report.

Moody’s also added that with the uncertainty over the potential impact from the new rules, coupled with the ongoing negotiation over the operating agreement, it is important for the airport to maintain a buffer in its financial metrics to manage against any unexpected impact when the new framework and operating agreement, or both, are introduced.