KUALA LUMPUR, Sept 14 — CGS-CIMB Research is optimistic that Malaysia Airports Holdings Bhd (MAHB) will see some excitement returning in the second half of this year (2H 2023), thanks to the continuing recovery in passenger traffic, stronger commercial rental collections and higher Eraman duty-free sales.

It also expects several potential positive catalysts from the regulatory side.

"The government is likely to sign the new operating agreement (OA) with MAHB by end-2023, and MAHB’s request is for the benchmark passenger service charges (PSCs) under the 2023 OA to be revised on a three-year basis, rather than on the current five-year basis as per the 2009 OA.

"We are also bracing ourselves for a possibly better-than-expected increase in benchmark PSCs from Jan 1, 2024 forecast than the 8.5 per cent that we have modelled; a one per cent uplift can raise our valuation by 1.7 per cent,” it said in a note today.

Meanwhile, CGS-CIMB estimated that MAHB gave a 30 per cent discount to its rental-paying tenants on the basis that passenger traffic has not fully recovered to pre-Covid-19.

"In essence, the airport operator only collected 47 per cent of the rentals that it was entitled to collect during 1H 2023, with the remaining 53 per cent lost to both rental waivers or discounts.

"The good news is that MAHB expects all of the shops to be open by the end of this year, hence there should be zero rental waivers and discounts in financial year 2024 (FY24),” it said.

Consequently, it forecast MAHB’s rental and commercial revenues to rise 39.5 per cent year-on-year to RM782 million in FY24, or 14 per cent higher than FY19 due to MAHB’s successful ‘commercial reset’ programme which has permanently increased base rentals, contributing a 27 sen hike to its sum-of-part (SOP valuation.

As such, CGS-CIMB raised its target price for MAHB’s shares to RM7.76 per unit, and upgraded the counter from ‘hold’ to ‘add’. — Bernama