KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) is well prepared for a pick-up in business after having taken the opportunity to upgrade its operations during the 2020 lockdown period.
As the country's borders reopen and air travel makes a strong recovery, the airports operator is expected to benefit from the lowered cost structure and commercial reset programme implemented during the pandemic, said Hong Leong Investment Bank (HLIB) research.
"Various costs containment measures were implemented with core cost reduction of -32.9% in FY21 (vs FY19) and management will remain cautious on opex in FY22.
"Management guided potential costs savings of more than RM50mil annually under the Cooling Energy Supply JV with TNB (effective Jul 2021)," it said in a report.
Meanwhile, the commercial reset program, which has been implemented since FY20, reconfigures the mix of shops and increases overall retail space by about 10%, which is expected to see results with the increase passenger movement and new airport shopping experiences.
Over at the group's Istanbul Sabiha Gokcen International Airport (ISGA), there was also a strong rebound in passenger movement in 2HFY21 as Turkey reopened its national borders and allowed tourism.
It added that a newly contracted duty-free operator Dufry since 4QFY20 is expected to provide stronger earnings upside to the airport with the passenger recovery in FY22.
On valuations, HLIB expects MAHB to return to pre-pandemic levels of RM8 to RM8.50 a share by end-2022 or early-2023.
"We take note that MAHB is now weaker balance sheet wise, with higher net gearing level of 74.8% at end FY21 (vs 40.7% at end FY19) as management shored up liquidity and restructured loan repayments with reported losses during the pandemic in FY20-21.
"Nevertheless, we deem the net gearing level is still manageable and expect MAHB to reduce its net gearing back to 43.8% by end FY24," it said.
HLIB expects lower losses in FY22 of RM17.8mil and a turnaround to profit in FY23 to RM596.5mil
It maintained "buy" on MAHB with a higher target price of RM8.05.