Stock Highlights

RM11.00 offer to support share price. Amid current market uncertainties, we believe MAHB offers decent arbitrage trading opportunities to earn c.11% return (or more if share price falls further) given the relatively firm RM11.00 takeover price offered by a deep-pocket consortium consisting of EPF, Khazanah Nasional, Abu Dhabi Investment Authority, and Global Infrastructure Partners. Once the four preconditions are met and a formal offer is made, we anticipate that MAHB will trade closer to the RM11.00 offer price by then. This privatisation exercise is estimated to be completed by 4Q24.

One hurdle cleared, three more to go. On 13 June, MAHB announced that it had fulfilled one of the four pre-conditions for the deal. The airport operator said the General Authority for Competition of Saudi Arabia (GAC) had issued a certificate confirming that the privatisation deal does not require notification to the GAC. The remaining three pre-conditions are required from Malaysian Aviation Commission, Turkish Competition Authority, and Egyptian Competition Authority.

Limited downside, even in a worst-case scenario. The worst-case scenario that could happen is that the privatisation bid by EPF and Khazanah is called off. Nevertheless, we believe the downside risk is limited even in this case, as MAHB’s fundamentals remain solid. The airport operator has recorded a total of 65m passenger movements in 1H2024, representing a 15.8% year-on-year growth and almost returning to pre-pandemic levels (~95.4%). We also note that, prior to the takeover announcement in May, the average consensus TP for MAHB (based on 15 analysts polled by Bloomberg) was RM9.70, with a range of RM8.50-11.30.

Medium-term uptrend intact. MAHB’s share price has been on the rise since 2020. The upward momentum has continued, with the share price exhibiting a pattern of higher highs and higher lows. The bullish trend was further confirmed when the share price broke through the ascending channel pattern with strong momentum in late 2023. Since then, the share price has continued to rise and has been trading above all its EMA lines, propelled further by the RM11.00 offer price announcement in May 2024.

Source: Mercury Research - 6 Aug 2024