Malaysia Airports shows confidence

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Tan Sri Bashir Ahmad, Managing Director of Malaysia Airports Holdings Berhad (MAHB)

Malaysia Airports Holdings Berhad (MAHB) is Malaysia’s largest airport operator and listed on the Main Market of Bursa Malaysia since 1999. It currently operates and manages 39 airports in Malaysia that include 5 international airports, 16 domestic airports and 18 short take-off and landing ports. Investvine asked MAHB’s Managing Director Tan Sri Bashir Ahmad for an update on the company’s performance and plans.

Q: Malaysia Airports recorded 12 per cent net profit growth during the first half of the year, how do you expect to perform in the 2nd half of the year?

A: We expect the net profit growth for Malaysia Airports Holdings Berhad to remain positive for the second half of 2013 which will be underpinned by higher traffic growth. We do expect the second-half traffic volume will outpace the passenger volume recorded during the first half of the year. Therefore we are cautiously optimistic to achieve our EBITDA target of 751 million ringgit by end of the year.

Q: You recently announced a 500 million ringgit sukuk. It was reported earlier in the year the amount was to be 1 billion ringgit to cover the extra costs for the financing of klia2. Do you foresee further costs or the cap to be at 4 billion ringgit of total cost?

A: The development costs of klia2 remain at 4 billion ringgit, and being one of the largest privately funded projects in Malaysia, klia2’s comprehensive funding programme has been fully planned earlier for progressive execution since 2010. MAHB has to date raised 3.6 billion ringgit for klia2 via five tranches of senior sukuk issuance in 2010-2013, comprising a total of 3.1 billion ringgit from its inaugural sukuk programme established in 2010 and the recent 500 million ringgit senior sukuk issued on September 6, 2013, under its Senior Sukuk and Perpetual Subordinated Sukuk Programme. MAHB expects to make the final sukuk issuance of up to 500 million ringgit by the first quarter if 2014 for the financing of klia2, and this is in accordance with the original funding programme of klia2.

The details of the 5 tranches of senior sukuks issued in chronological order under the comprehensive financing programme totaling 4.1 billion ringitt for klia2 are:

1.   A 10-year 1.0 billion ringgit senior sukuk issued on August 30, 2010, at a profit rate of 4.55 per cent maturing on August 28, 2020.

2.   A 12-year 1.5 billion ringgit senior sukuk issued on December 17, 2010 at a profit rate of 4.68 per cent maturing on December 16, 2022

3.   A 12-years 600 million ringgit senior sukuk issued on December 28, 2012 at a profit rate of 4.15 per cent maturing on December 27, 2024

4.   A dual-tranche senior sukuk issued on September 6, 2013 comprising a 3-year 250.0 million ringgit tranche, and a 5-year 250.0 million ringgit tranche at a yield of 3.85 per cent and 4.15 per cent, respectively, maturing on September 6, 2016 and September 6, 2018, respectively.

On a separate note, RAM Ratings Berhad had also on multiple occasions reaffirmed MAHB’s AAA rating as a strong testimony of MAHB’s solid financial standing and stability, for example:

On November 25, 2011 upon MAHB unveiling the building of a better and larger klia2, which has been significantly upgraded with superior facilities compared to the original design at a development cost of 4 billion ringgit.

On June 26, 2013 upon MAHB announcing the revised completion date for klia2 to be on May 2, 2014, RAM made a press release titled “Delay in klia2 completion not expected to impact Malaysia Airports’ ratings” and maintained MAHB’s AAA rating citing notwithstanding the delay in the completion of klia2, RAM envisages the financial impact on MAHB to be minimal as MAHB’s operating performance would continue to be underpinned by healthy passenger volumes.

It is also noted that the recent 500 million ringgit senior sukuk issued on September 6, 2013, pursuant to MAHB’s Senior Sukuk and Perpetual Subordinated Sukuk Programmes, have also been assigned long-term ratings of AAA and AA2 respectively by RAM Rating Services Berhad, the highest ratings possible for both senior and subordinated programmes of its kind. The Perpetual Subordinated Sukuk Programme represents the first rated Perpetual Subordinated Sukuk Programme in Malaysia which is in line with MAHB’s commitment to support the government’s ongoing initiatives and efforts in positioning Malaysia as an international Islamic financial center.

Q: Iraqi Airways came back after a 30+ year hiatus, do you expect to announce the arrival of other airlines in the near future?

A: Malaysia Airports’ marketing team continues to work tirelessly to attract both the airlines that fly to nearby destinations but not yet into Malaysia (which now number only about a dozen), as well as those airlines that might uniquely prefer Malaysia over other destinations as how Iraqi Airways did. We are currently speaking to a few prospective airlines to link them to KLIA or each of the regional international airports. Hence, there is opportunity for us to receive more airlines in the near future. Whilst we will surely announce the arrival of other airlines publicly, we must admit that the total of eight new airlines that arrived at KLIA in 2013 is already a little ahead of our expectations this year.

Q: Many readers have expressed dismay due to the numerous delays and the issue with the contractors and uncertainty created, what would you say to address our readers on these concerns?

A: In fact, klia2 is the world’s largest purpose-built terminal dedicated for low-cost airlines. In conceptualising and developing the new klia2 terminal, all its stakeholders’ critical needs and requirements have been taken into consideration. From very early on, we realised that klia2 would differ significantly from the temporary low-cost carrier terminal (LCCT) currently in operation in Kuala Lumpur to meet both the low-cost carriers’ business model requirements as well as passenger requirements. For instance, providing premium and VIP lounges for airlines at the new klia2 terminal.

Furthermore, in complying with the government of Malaysia’s as well as international aviation standards established by the International Civil Aviation Organisation (ICAO), klia2 will enable full segregation of international and domestic passengers, and further between arriving and departing passengers. This relatively new international requirement is only exercisable at newly designed terminals and airports, and thus will be enforced at klia2, but not even at some of the other world-renowned airports in the region.

The terminal is also being built to meet the needs and the rapid growth of the low-cost travel sector locally and regionally and to support the Malaysian aviation industry to be more competitive in the future. Featuring a much larger terminal footprint than the current LCCT at 257,000 square meters, 68 contact stands with aerobridges and a fully-automated baggage handling system, klia2 will be the world’s largest purpose-built terminal dedicated for low-cost airlines that will raise the level of comfort for passengers with enhanced safety and security standards.

Also, klia2 will boast the first airport skybridge in Asia that will give the added advantage of greater aircraft manoeuvrability at the apron while providing a spectacular view of the airside to passengers crossing to the satellite building. This is not a vanity feature, but will minimise fuel-burn for aircraft at klia2, in their pursuit to maximise operational efficiencies and further entrench KLIA as Asia’s largest airport for low-cost travel.

Added to that is another high-speed train stop that will connect the klia2 terminal with KLIA’s main terminal building and Kuala Lumpur city centre, as well as an integrated complex that will house various commercial offerings and multi-modal public transportation, creating seamless connectivity and convenience for all passengers.

The scope of klia2 has been expanded to address the requirements of all airport users and stakeholders, and to ensure a satisfactory level of comfort and safety for the passengers. The terminal’s development cost of 4 billion ringgit commensurate with the increase in scope and facilities of klia2, as compared to simply replicating a standalone LCCT in the new, optimised permanent location.

Q: Passenger capacity will be raised to 45 million a year, which speaks volumes about the growth of the tourism industry in Malaysia and the work of the local airlines, with the 2015 AEC agreement maybe numbers will rise. Do you see this as an expansion and foresee further expansion in the mid-term?

A: With the new klia2 terminal, KLIA will total 70 million in annual passenger capacity, an increase of 30 million in annual rated capacity. In addition, the entry of Malaysia Airlines into the Oneworld Alliance in early 2013 has begun to reap dividends in connecting passengers who now choose to transit and transfer via KLIA. We think this will continue to deepen in 2014 as passengers continue to vote with their wallets and choose where they have efficient and comfortable connections that further reward their preferred frequent flyer programmes.

The government of Malaysia’s focus on promoting tourism also dovetails nicely with the renewed vigour at our airports. For instance, Kota Kinabalu, Langkawi and Kuching international airports continue to attract direct flights from regional hubs like Singapore and Hong Kong. Other domestic airports like Miri in Sarawak are also attracting new interest as total passenger numbers creep past some other more celebrated airports. Therefore, the signs are clearly there for further expansion.

Tan Sri Bashir Ahmad

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Reading Time: 6 minutes

Tan Sri Bashir Ahmad, Managing Director of Malaysia Airports Holdings Berhad (MAHB)

Malaysia Airports Holdings Berhad (MAHB) is Malaysia’s largest airport operator and listed on the Main Market of Bursa Malaysia since 1999. It currently operates and manages 39 airports in Malaysia that include 5 international airports, 16 domestic airports and 18 short take-off and landing ports. Investvine asked MAHB’s Managing Director Tan Sri Bashir Ahmad for an update on the company’s performance and plans.

Reading Time: 6 minutes

bashir4
Tan Sri Bashir Ahmad, Managing Director of Malaysia Airports Holdings Berhad (MAHB)

Malaysia Airports Holdings Berhad (MAHB) is Malaysia’s largest airport operator and listed on the Main Market of Bursa Malaysia since 1999. It currently operates and manages 39 airports in Malaysia that include 5 international airports, 16 domestic airports and 18 short take-off and landing ports. Investvine asked MAHB’s Managing Director Tan Sri Bashir Ahmad for an update on the company’s performance and plans.

Q: Malaysia Airports recorded 12 per cent net profit growth during the first half of the year, how do you expect to perform in the 2nd half of the year?

A: We expect the net profit growth for Malaysia Airports Holdings Berhad to remain positive for the second half of 2013 which will be underpinned by higher traffic growth. We do expect the second-half traffic volume will outpace the passenger volume recorded during the first half of the year. Therefore we are cautiously optimistic to achieve our EBITDA target of 751 million ringgit by end of the year.

Q: You recently announced a 500 million ringgit sukuk. It was reported earlier in the year the amount was to be 1 billion ringgit to cover the extra costs for the financing of klia2. Do you foresee further costs or the cap to be at 4 billion ringgit of total cost?

A: The development costs of klia2 remain at 4 billion ringgit, and being one of the largest privately funded projects in Malaysia, klia2’s comprehensive funding programme has been fully planned earlier for progressive execution since 2010. MAHB has to date raised 3.6 billion ringgit for klia2 via five tranches of senior sukuk issuance in 2010-2013, comprising a total of 3.1 billion ringgit from its inaugural sukuk programme established in 2010 and the recent 500 million ringgit senior sukuk issued on September 6, 2013, under its Senior Sukuk and Perpetual Subordinated Sukuk Programme. MAHB expects to make the final sukuk issuance of up to 500 million ringgit by the first quarter if 2014 for the financing of klia2, and this is in accordance with the original funding programme of klia2.

The details of the 5 tranches of senior sukuks issued in chronological order under the comprehensive financing programme totaling 4.1 billion ringitt for klia2 are:

1.   A 10-year 1.0 billion ringgit senior sukuk issued on August 30, 2010, at a profit rate of 4.55 per cent maturing on August 28, 2020.

2.   A 12-year 1.5 billion ringgit senior sukuk issued on December 17, 2010 at a profit rate of 4.68 per cent maturing on December 16, 2022

3.   A 12-years 600 million ringgit senior sukuk issued on December 28, 2012 at a profit rate of 4.15 per cent maturing on December 27, 2024

4.   A dual-tranche senior sukuk issued on September 6, 2013 comprising a 3-year 250.0 million ringgit tranche, and a 5-year 250.0 million ringgit tranche at a yield of 3.85 per cent and 4.15 per cent, respectively, maturing on September 6, 2016 and September 6, 2018, respectively.

On a separate note, RAM Ratings Berhad had also on multiple occasions reaffirmed MAHB’s AAA rating as a strong testimony of MAHB’s solid financial standing and stability, for example:

On November 25, 2011 upon MAHB unveiling the building of a better and larger klia2, which has been significantly upgraded with superior facilities compared to the original design at a development cost of 4 billion ringgit.

On June 26, 2013 upon MAHB announcing the revised completion date for klia2 to be on May 2, 2014, RAM made a press release titled “Delay in klia2 completion not expected to impact Malaysia Airports’ ratings” and maintained MAHB’s AAA rating citing notwithstanding the delay in the completion of klia2, RAM envisages the financial impact on MAHB to be minimal as MAHB’s operating performance would continue to be underpinned by healthy passenger volumes.

It is also noted that the recent 500 million ringgit senior sukuk issued on September 6, 2013, pursuant to MAHB’s Senior Sukuk and Perpetual Subordinated Sukuk Programmes, have also been assigned long-term ratings of AAA and AA2 respectively by RAM Rating Services Berhad, the highest ratings possible for both senior and subordinated programmes of its kind. The Perpetual Subordinated Sukuk Programme represents the first rated Perpetual Subordinated Sukuk Programme in Malaysia which is in line with MAHB’s commitment to support the government’s ongoing initiatives and efforts in positioning Malaysia as an international Islamic financial center.

Q: Iraqi Airways came back after a 30+ year hiatus, do you expect to announce the arrival of other airlines in the near future?

A: Malaysia Airports’ marketing team continues to work tirelessly to attract both the airlines that fly to nearby destinations but not yet into Malaysia (which now number only about a dozen), as well as those airlines that might uniquely prefer Malaysia over other destinations as how Iraqi Airways did. We are currently speaking to a few prospective airlines to link them to KLIA or each of the regional international airports. Hence, there is opportunity for us to receive more airlines in the near future. Whilst we will surely announce the arrival of other airlines publicly, we must admit that the total of eight new airlines that arrived at KLIA in 2013 is already a little ahead of our expectations this year.

Q: Many readers have expressed dismay due to the numerous delays and the issue with the contractors and uncertainty created, what would you say to address our readers on these concerns?

A: In fact, klia2 is the world’s largest purpose-built terminal dedicated for low-cost airlines. In conceptualising and developing the new klia2 terminal, all its stakeholders’ critical needs and requirements have been taken into consideration. From very early on, we realised that klia2 would differ significantly from the temporary low-cost carrier terminal (LCCT) currently in operation in Kuala Lumpur to meet both the low-cost carriers’ business model requirements as well as passenger requirements. For instance, providing premium and VIP lounges for airlines at the new klia2 terminal.

Furthermore, in complying with the government of Malaysia’s as well as international aviation standards established by the International Civil Aviation Organisation (ICAO), klia2 will enable full segregation of international and domestic passengers, and further between arriving and departing passengers. This relatively new international requirement is only exercisable at newly designed terminals and airports, and thus will be enforced at klia2, but not even at some of the other world-renowned airports in the region.

The terminal is also being built to meet the needs and the rapid growth of the low-cost travel sector locally and regionally and to support the Malaysian aviation industry to be more competitive in the future. Featuring a much larger terminal footprint than the current LCCT at 257,000 square meters, 68 contact stands with aerobridges and a fully-automated baggage handling system, klia2 will be the world’s largest purpose-built terminal dedicated for low-cost airlines that will raise the level of comfort for passengers with enhanced safety and security standards.

Also, klia2 will boast the first airport skybridge in Asia that will give the added advantage of greater aircraft manoeuvrability at the apron while providing a spectacular view of the airside to passengers crossing to the satellite building. This is not a vanity feature, but will minimise fuel-burn for aircraft at klia2, in their pursuit to maximise operational efficiencies and further entrench KLIA as Asia’s largest airport for low-cost travel.

Added to that is another high-speed train stop that will connect the klia2 terminal with KLIA’s main terminal building and Kuala Lumpur city centre, as well as an integrated complex that will house various commercial offerings and multi-modal public transportation, creating seamless connectivity and convenience for all passengers.

The scope of klia2 has been expanded to address the requirements of all airport users and stakeholders, and to ensure a satisfactory level of comfort and safety for the passengers. The terminal’s development cost of 4 billion ringgit commensurate with the increase in scope and facilities of klia2, as compared to simply replicating a standalone LCCT in the new, optimised permanent location.

Q: Passenger capacity will be raised to 45 million a year, which speaks volumes about the growth of the tourism industry in Malaysia and the work of the local airlines, with the 2015 AEC agreement maybe numbers will rise. Do you see this as an expansion and foresee further expansion in the mid-term?

A: With the new klia2 terminal, KLIA will total 70 million in annual passenger capacity, an increase of 30 million in annual rated capacity. In addition, the entry of Malaysia Airlines into the Oneworld Alliance in early 2013 has begun to reap dividends in connecting passengers who now choose to transit and transfer via KLIA. We think this will continue to deepen in 2014 as passengers continue to vote with their wallets and choose where they have efficient and comfortable connections that further reward their preferred frequent flyer programmes.

The government of Malaysia’s focus on promoting tourism also dovetails nicely with the renewed vigour at our airports. For instance, Kota Kinabalu, Langkawi and Kuching international airports continue to attract direct flights from regional hubs like Singapore and Hong Kong. Other domestic airports like Miri in Sarawak are also attracting new interest as total passenger numbers creep past some other more celebrated airports. Therefore, the signs are clearly there for further expansion.

Tan Sri Bashir Ahmad

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