Business

Friday April 27, 2012

MAHB aims to keep AAA rating once sukuk facility utilised by mid 2013

By DANIEL KHOO
danielkhoo@thestar.com.my


KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) is aiming to keep its prized AAA rating from RAM Rating Services Bhd once it completes the full drawdown of its Islamic debt issuance facility (sukuk) latest by the middle of next year, said its chief financial officer Faizal Mansor.

The airport operator has to date already drawn down RM2.5bil of the total sukuk allocation amounting to RM3.1bil, meaning that it has a balance of RM600mil left to use from the financing facility.

“Most likely, (the complete drawdown) will happen at the end of this year or at the very latest middle of next year.

“Right now our (debt to equity ratio) is at 65%. Our bond covenant allows us to go up to 125%. But for us to maintain a AAA rating which is very valuable to us, it should be below 100%.

“We definitely will ensure we maintain below 100%,” Faizal told journalists at its press briefing on its first quarter financial results.

Faizal said the complete drawdown of its sukuk financing facility is expected to increase its debt to equity ratio to about 90% and this was expected to drop once the Kuala Lumpur International Airport 2 (KLIA2) reaches its second year of operations.

KLIA2 is expected to be completed in April 2013.

The country's airport operator had recently completed its private placement exercise, enlarging its share base by 110 million new shares and enabling it to raise RM616mil. The private placement exercise had attracted demand from domestic and foreign institutional investors, Faizal said.

MAHB's year-on-year net profit for the first quarter ended March 31, 2012 rose 6.9% to RM102.7mil from RM96.1mil. Revenue advanced to RM657.71mil from RM617.77mil.

The airport operator said in a statement that it had adopted certain new accounting practices called the IC Interpretation 12: Service Concession Arrangements, which meant that MAHB would have to recognise construction revenue and costs in accordance with FRS 111: Construction Contracts, referring to the stage of completion of the construction works of KLIA2 and the Penang International Airport.

“In the first quarter of financial year 2012 (Q1FY2012), MAHB recognised the construction revenue and costs in relation to the aforesaid projects amounting to RM146.6mil and RM140.0mil respectively,” it said in a statement.

“Excluding the effects of IC12, revenue for Q1FY2012 was RM511.1mil, which was 12.2% higher than the RM455.4mil registered in the first quarter of the financial year 2011. Profit before taxes for Q1FY2012 was RM147mil, which was 10% higher than the RM133.6mil registered in Q1FY2011,” MAHB added.

Its net assets per share rose by a year-on-year basis to RM3.52 from RM3.46.

Notably, MAHB had seen an increase in the number of employees that it hired by 7.7% to 6,323 people from 5,873 people on a year-on-year basis due to regulatory requirements to have more security personnel.

“One of our biggest challenges is with regards to the number of staff.

“This is also to prepare for KLIA2, the training and so on requires more staff for KLIA2.

“(But) we still fall short of the current requirements for security personnel,” Faizal said at the press briefing.

MAHB expected to recruit an additional 500-800 or more employees for KLIA2 due mainly to regulatory requirements, Faizal said, adding that the present low cost carrier terminal had needed to employ less staff with a headcount of 200-300 people.

“Because the (new) terminal (KLIA2) is going to be more than double the size, some of these costs can go up to as high as 100%.

“This is one of the areas we have really looked at when buidling KLIA2 - we were mindful of the total cost of operations.

“We have put in a lot of payment upfront to ensure that the cost of runnning KLIA2 later on is not (too) costly,” Faizal said.

“Total costs increased by 15.6% or RM44.2mil due to the increase in staff cost and utilities.

“Higher staff costs are mainly due to annual increments, additional recruitment and the impact of adjustments arising from the finalisation of non-executive 6th Collective Agreement in October 2011.

“Increase in utilities was mainly attributable to higher passenger movements,” MAHB said in the statement accompanying its financial results.

Despite that, MAHB said its revenues had also increased in tandem with the increase of staff costs.

It said in its presentation that total revenue per employee rose by 5% year-on-year to RM79,728 from RM75,928 while staff costs as a percentage of operating cost remained almost flat at 27.61% from 27.4% on a year-on-year basis.

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