GATEWAY Development Alliance Sdn Bhd (GDA) and its shareholders (the consortium) announced that, as at Jan 8, it received valid offer acceptances of 1.40 billion shares, representing 84.1% of the total number of issued shares in Malaysia Airport Holdings Bhd (MAHB).
The encouraging level of acceptance by the first closing date, despite the intervening holiday period, moves the consortium decisively towards satisfying the 90% acceptance condition and the threshold required to de-list MAHB per the offer.
For shareholders who have yet to submit their acceptances, the consortium highlights that the offer period has been extended to Jan 17.
Save for the extension, all other terms including the offer price of RM11 and the 90% acceptance condition remain unchanged.
Higher offer price
GDA remains firm that its offer price of RM11 per share is highly compelling and attractive to shareholders.
RM11 is higher than any price MAHB has ever traded at, representing a 49.5% premium year-to-date and implying a price-to-earnings ratio of 37.7x.
All 14 licensed equity research analysts currently covering MAHB have targeted prices that are either lower than or equal to RM11.
Most also explicitly recommend that shareholders accept the offer.
Addressing shortcomings
The consortium reiterates its view that MAHB’s shortcomings in maintaining its core assets and systems, and prolonged history of underperformance both operationally and financially, will only be properly addressed if it is not constrained by a public market listing and is able to adopt a fresh approach.
A case in point is the automated people mover system (Aerotrain) at Kuala Lumpur International Airport (KLIA) Terminal 1, which has suffered multiple service failures over the past decade and continues to be challenged by ongoing and unresolved issues.
The re-opening date remains uncertain as it nears the second anniversary of total service suspension.
The consortium believes one of the root causes of MAHB’s issues is its continuous underinvestment in critical operational infrastructure and projects to drive growth and expansion.
Over the last five years, MAHB spent RM1.3bil in capital expenditure (capex) compared to RM18.9bil by Singapore’s Changi Airport, RM8.1bil by Indonesia’s Angkasa Pura Airport and RM6.8bil by Airports of Thailand.
This prolonged underinvestment has resulted in an ageing asset base and led to numerous high-profile operational failures.
The passenger experience has also deteriorated significantly, as noted by Skytrax, which plummeted KLIA’s ranking from the second-best airport in the world in 2001 to 71st last year – highlighting the urgent need for significant remediation and expansion capex.
Unsurprisingly, MAHB has been losing ground in the Asean aviation market. Over the last 10 years, KLIA has lost passengers while key regional peers have grown significantly. This has resulted in MAHB’s market share declining from 20% to 16%.
During this time, KLIA’s regional peers, including Changi Airport in Singapore and Suvarnabhumi Airport in Bangkok, Thailand, continue to make significant investments to increase their capacity and further distance themselves from KLIA.
Financial underperformance
Over a 10-year period, MAHB has consistently underperformed against listed Asia-Pacific peers across a number of key financial metrics.
Moreover, MAHB’s dividend has remained stagnant over the past decade and the organisation distributed only RM0.11 per share in 2024.
This implies a 1.0% dividend yield, which is four times lower than the KLCI Bursa Malaysia Index and three times lower than the DJ Airports Index.
The RM11 per share offer price compares to RM0.82 of dividends MAHB has paid over the past 10 years.
Commitment to turning around MAHB
As highlighted in its offer document on Dec 6, 2024, the consortium intends to upgrade and modernise MAHB’s operations, enhance passenger service, improve airline connectivity and stimulate traffic growth.
The consortium believes that such objectives will be best achieved by MAHB as a private entity, taking a long-term approach to decision-making and capital investment, and benefitting from GIP’s (Global Infrastructure Partners) airport expertise.
With its combined resources and control of the board, the consortium – together with the management – will be able to expedite necessary capital investments and provide the requisite technical expertise to realise MAHB’s full potential.
This offer presents a compelling opportunity for MAHB shareholders to achieve immediate and attractive returns.
GDA encourages all shareholders who have not yet accepted the offer to do so before the revised closing time of 5pm on Jan 17.
