PETALING JAYA: Analysts are positive on the Malaysian Aviation Commission’s (Mavcom) implementation of the First Regulatory Period (RP1) for Malaysia Airports Holdings Bhd (MAHB), which brings revisions to the Passenger Service Charge (PSC).
The RP1 will take effect from June 1 to Dec 31, 2026.
The PSC rates have been unified into a single international departure of RM73 per person for Kuala Lumpur International Airport (KLIA) Terminal 1, and RM50 per pax for KLIA Terminal 2 and other airports.
Mavcom is also introducing a transfer PSC for passengers transiting through a Malaysian airport, with the rate for domestic travel through all airports being RM7, while the rates are RM42 for international travel through KLIA Terminal 1 and RM29 for international travel through KLIA Terminal 2 and other airports.
The aviation regulator will also be carrying out the Loss Capitalisation Mechanism (LCM), which would allow MAHB to recover 90% of any regulatory loss it incurs in RP1, which will be recovered over a period of up to 10 years starting in the first year of the second regulatory period (RPS2) which begins in 2027.
RHB Research said the implementation of both the PSC and LCM would be beneficial to MAHB, commenting in a note to clients yesterday that the LCM would allow MAHB to pursue necessary investments, services enhancements, and airport development efforts.
The research house explained that the regulatory loss or gain pertaining to MAHB as outlined in the LCM is the difference between MAHB’s actual economic costs –including capital expenditure (capex), operating expenditure (opex) and tax obligations – and actual airport-related revenue.
“If MAHB’s economic costs outweigh airport revenue, a proportion of this loss will be recovered from customers in future periods through proportionately higher airport service charges (ASC).
“This could reasonably occur under a scenario where demand is artificially low, but MAHB still has significant fixed costs and needs to make investments to meet future expected demand,” it said.
On the other hand, it pointed out if airport revenue is higher than economic costs, a proportion of this gain will be returned in future periods through proportionately lower ASC.
This could occur if demand grew more quickly than expected and MAHB is able to service this demand without incurring significant costs, said RHB Research.
Hong Leong Investment Bank (HLIB) Research opined that MAHB would be able to collect overall higher revenue through effectively higher PSC and new PSC for transfer passengers, as well as incremental aircraft landing and parking charges, leading to potentially stronger earnings.
“MAHB’s cash flow will also improve, allowing for higher capex spending,” it said in a note.
The research house said MAHB would continue to leverage on the anticipated recovery of air travel demand this year.
The finalisation of operating agreements and its regulated asset base structure would strengthen the company’s commitment towards airport developments in Malaysia.
It added: “The disposal of the GMR Hyderabad International Airport Limited (GHIAL) for US$100mil by the first quarter of 2024 will also strengthen MAHB’s balance sheet.”
Echoing the other research houses, Kenanga Research acknowledged that the latest development is expected to be earnings positive to MAHB.
Nevertheless, it said the latest tariff rate might not be sufficient for the group to raise sufficient cash flows given the urgency for airport expansion and maintenance capex in Malaysia to enable the latter to accumulate the required cash for capex purposes.
It reiterated its confidence that air travel would continue to recover throughout 2024, projecting tourist arrivals in Malaysia to jump 35% to 27 million from an estimated 20 million a year ago.
“This should underpin growth in MAHB’s passenger throughput demand in 2024. We expect traffic trajectory to grow in subsequent months as airlines continue to re-activate more aircraft to meet increasing demand,” it said.
HLIB Research and RHB Research have “buy” and “overweight” calls on MAHB, with target prices (TP) of RM9.80 and RM9.67 respectively.
Concurrently, Kenanga Research issued a “market perform” call on the counter, with a TP of RM9.