SEPANG – Malaysia Airports Holdings Berhad (Malaysia Airports) held its 16th Annual General Meeting this morning at Sama-Sama Hotel KLIA. The AGM began with Malaysia Airports’ Chairman, Tan Sri Dato’ Sri Dr. Wan Aziz Wan Abdullah welcoming Malaysia Airports’ new Directors on the Board, namely Datuk Mohd Badlisham Ghazali, Datuk Dr. Ismail Hj. Bakar, Dato’ Siti Zauyah Md Desa and Datuk Ruhaizah Mohamed Rashid. At the same time, Tan Sri Dato’ Sri Dr. Wan Aziz Wan Abdullah expressed his gratitude to Tan Sri Bashir Ahmad Abdul Majid, Datuk Seri Long See Wool, Puan Eshah Meor Suleiman and Mr Chua Kok Ching for their dedication and invaluable services to the Malaysia Airports’ Board during their tenure. Malaysia Airports also extended their utmost appreciation to Tan Sri Bashir Ahmad who had served Malaysia Airports for more than a decade as Managing Director of Malaysia Airports.
Financial Performance Overview
Malaysia Airports Holdings Berhad (“MAHB”) recorded earnings before interest, tax, depreciation and amortisation (“EBITDA”) of RM861.4 million (without construction revenue and cost) achieving its key performance indicator (“KPI”) target for the financial year ended 31 December 2014 (“FY2014”). This 4.1% growth is supported by the growth in passenger movements in Malaysia of 4.7% for the whole year.
Profit before tax (“PBT”) had improved by 50.8% to RM834.2 million mainly due to gain on bargain purchase and adjustments on fair value of investments. These adjustments are due to the acquisitions of the 40% remaining stakes in Istanbul Sabiha Gökçen Uluslararasi Havalimani Yatirim Yapim Ve Isletme A.S. (“Istanbul Sabiha Gökçen International Airport” or “ISG”) and LGM Havalimani Isletmeleri Ticaret ve Turizm A.S. (“LGM”). RM379.1 million was recognised as gain on bargain purchase as MAHB acquired ISG for less than its fair value. A further RM502.5 million was also recognised as gains from fair value re-measurement of ISG and LGM assets.
Operating revenues recorded a growth of 8.9% from RM2,462.9 million to RM2,681.3 million. The higher operating revenues were attributable to the improved results from airport operations segment which grew further by 7.9% to RM2,509.8 million for the year ended 31 December 2014. This commendable growth is supported on the back of the positive outlook of both aeronautical and non-aeronautical revenues which registered 10.7% and 4.9% growth respectively.
Aeronautical revenue is generated mainly from the collection of passenger service charge (“PSC”), landing parking fees, and other ancillary charges to the airlines. This component has been the biggest revenue contributor to MAHB with a positive performance to RM1,341.1 million from RM1,211.0 million the previous year. The improvement in aeronautical revenue is also in tandem with the positive growth of passengers and aircraft in all airports.
On the other hand, non-aeronautical revenue in airport operations with a contribution of RM1,168.7 million to the airport operations saw a growth of 4.9% generated from rental of space, advertising, other commercial segments and retail sales. This was mainly due to the higher occupancy rate and higher rental resulting from increase in rental space at klia2.
MAHB recorded a total passenger movement of 83.4 million passengers improving by 4.7% from the previous year. Meanwhile, total aircraft movements grew by 7.3%, with the domestic sector recording a higher growth of 8.1% compared to the international sector, which recorded a 5.9% growth.
Dividend
MAHB remains committed in enhancing shareholder value and hence, have in place a dividend payment policy of at least 50% of the Group's profit after tax and minority interest. For FY2014, the Board had announced an interim dividend of 2.00 sen amounting to RM27.5 million, of which RM14.7 million was reinvested in Dividend Reinvestment Plan ("DRP") while RM12.8 million was paid in cash on 22 January 2014. A single tier final dividend of 3.60 sen was approved today by the shareholders at the AGM.
Perpetual Subordinated Sukuk Issuance
One of the main highlights of the year for MAHB is the successful issuance of the RM 1.0 billion Perpetual Non-call 10 years Subordinated Sukuk completed on 15 December 2014. The issuance was pursuant to its Senior Sukuk Programme and Perpetual Subordinated Sukuk Programme with aggregate nominal value of up to RM2.5 billion (collectively known as the "Sukuk Musharakah Programmes").
This inaugural issuance represents the world’s first-ever rating agency equity content targeted Sukuk hybrid and first rated perpetual Sukuk in Malaysia. The Subordinated Sukuk was offered via a book-building exercise whereby the final order was in excess of RM5.0 billion which represented a bid-to-cover-ratio of 5.5 times. This is a testimony of confidence that investors have on MAHB’s solid financial performance and business operations.
The issuance would also enable the industry to realise the benefit of such hybrid instruments as a cost efficient and non-dilutive capital raising solution that lowers cost of capital. The proceeds from the issuance of the Sukuk are being utilised by MAHB for the purpose of working capital requirements, general investments and/or refinancing of borrowings of its group and/or subsidiaries that are shariah-compliant.
MAHB’s efforts and financial excellence have been extensively acknowledged and recognised. On 27 March 2015, MAHB was awarded the “Market Pioneer Award” at the RAM League Awards, a testament for its success issuance of the RM1.0 billion Perpetual Subordinated Sukuk. It was an achievement for MAHB, considering the fact that the Perpetual Subordinated Sukuk Programme was 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 centre.
ISG and LGM Acquisitions
MAHB had on 5 January 2015 announced the completion of the acquisitions of ISG and LGM respectively, after it had exercised its right of first refusal to acquire the remaining final 40% stake in ISG and LGM for a total consideration of EUR279.2 million.
Through the acquisitions, with the holding of 100% equity, ISG is now a wholly-owned subsidiary under MAHB. Being one of the fastest growing airports in the world, the acquisition is in line with Malaysia MAHB's intention to diversify its earnings.
The acquisitions were ultimately funded by the proceeds from the rights issue exercise which was completed on 27 March 2015. Upon the completion of the exercise, 275.3 million new shares were issued and listed on Main market of Bursa Malaysia Securities Berhad raising approximately RM1.3billion. Approval for the acquisitions and the funding was given by the shareholders during Extraordinary General Meeting (“EGM”) on 23 December 2014.
Prior to acquiring the final 40%, MAHB had on 2 May 2014 acquired a 40% stake in ISG for a cash consideration of EUR209.0 million to become the single-largest shareholder. The first acquisition was funded by a private placement of 124.1 million new shares via an accelerated book-building exercise raising approximately RM980.0 million which was completed on 12 March 2014.
Refinancing of ISG
A EUR500.0 million Senior Secured Term Loan Facility was undertaken by ISG on 24 December 2014 with the objective of reducing its financing cost. The facility was guaranteed by MAHB and was pre-funded and fully underwritten by BNP Paribas Fortis S.A./N.V., CIMB Bank Berhad, Labuan Offshore Branch and Deutsche Bank AG, Singapore Branch, jointly the Mandated Lead Arrangers and Bookrunners (“MLABs”). The pre-funding by the MLABs demonstrates their full-confidence in ISG’s performance and ability to generate positive returns to MAHB.
Upon the successful acquisition of ISG, MAHB had placed in line some strategic outline as a commitment to further improve ISG’s financial position. A syndication process was launched on 27 January 2015 with the objective to sell down the loan to the secondary market for more participation by various reputable financial institutions across different regions. The syndication has garnered an overwhelming demand hence had positively reduced the loan interest rate margin from 2.75% to 2.50%.
MAHB’s effort in pushing for reverse-flex structure has been positively applauded by International Financial Review on its review dated 7 March 2014 that MAHB despite not borrowing internationally, is surprisingly well versed with the intricacies of the market as it pushes for the reverse-flex, despite its rarity in global debt market. MAHB is the first non-US Corporate that has ever achieved this structure, and the only other time it was done by another corporate was a US Corporate 10 years ago.
2015 Industry Outlook
The optimistic trend in continuous rising of business confidence and robust GDP performance in key emerging markets such as ASEAN appears to be in favour for MAHB. On top of that, strong performance in Asia Pacific aviation market will be a strong catalyst for MAHB to attain its EBITDA KPI of RM1,522.0 million for the financial year ended 31 December 2015 (“FY2015”). With klia2 being fully operational, MAHB’s performance is expected to be enhanced further from this year onwards. It is anticipated that klia2 will promote strong passenger movements and will stimulate retail and commercial operations for higher return. Together with the initiatives laid out by the Government, MAHB is certain that it will achieve its target.
The acquisition of ISG reinforces MAHB’s strategic position and aspiration to become a major global airport player. With a passenger growth of 25.4% in ISG, owning one of the fastest growing airports in the world helps to diversify MAHB’s earnings and strengthens its foothold and influence as a world class airport operator.
Malaysia Airports also expects another year of steady growth at its airports in 2015 as KLIA continues to welcome new and returning airlines. Turkmenistan Airlines began a weekly service between Kuala Lumpur and Ashgabat in February 2015. British Airways, after a 14-year hiatus, will return to KLIA in May, offering daily flights on a three class Boeing 7777-200ER to London. All Nippon Airways (ANA), meanwhile will start operations to Tokyo in September on its new Boeing 787 Dreamliner.
A cornerstone of Malaysia Airports new vision as a global leader in creating airport cities, the Mitsui Outlet Park KLIA is one of the KLIA Aeropolis’ key projects. Mitsui Outlet Park KLIA will be opened to public on 30 May 2015, raising further the profile of Malaysia Airports and representing another step forward in Malaysia Airports’ plans for the KLIA Aeropolis.
The world’s largest terminal dedicated to low cost carriers, klia2, has just celebrated its first year of operations on 2 May 2015 and is now established as a major hub for low-cost travel as well as the home base of AirAsia. The expansion of retail space in the terminal with the ‘Mall in an Airport; Airport in a Mall” concept is expected to have a favourable effect on Malaysia Airports’ commercial value. Malaysia Airports is also continuing to make inroads to the Middle East via the additional contracts secured at the Prince Hamad International Airport, Doha, Qatar
Appreciation
Malaysia Airports concluded the AGM by thanking Malaysia Airports’ Board of Directors, shareholders, airline partners, Government agencies, retailers, joint venture partners, vendors and suppliers for their continued support in helping Malaysia Airports realise its ambitions and reach even greater heights in the future.