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
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