By now we would have read that the FAA downgrade of Malaysia's aviation safety rating has nothing to do with the airlines, but rather on the regulatory functions. This has caused concerns over some of us, when does not know how it is going to impact our aviation sector. One director went further by saying that the FAA would not have done check on us until Airasia X had its flight to Honolulu. In fact, since 2003, the FAA had not had a check on us. Is it a blame on Airasia X, or he is just saying a fact.
That same person runs Time Dotcom. I think he may have said a factual matter, but does it matter? Should it be because of a flight route initiated to Honolulu, we should now be putting our house in order - safety that it?
As a customer to airlines and the aviation industry, we have been bombarded by continuous price increases over the last few years. We created MAVCOM in 2015 which some say overlaps the function of CAAM. We even pay RM1 to support MAVCOM each time we take a commercial flight. I am sure given the continuous increase in passenger traffic, they should be sufficiently covered financially. It is ironic, that the users are the one that usually covers the expenses of these guys whereas their functions should be improving the infrastructure and profile of Malaysia as an aviation and tourism hub. The winner has been MAVCOM and the country but the users are the one who pay.
When we have CAAM whose salary scale follows the government and it is supposedly insufficient to entice the experienced people to stay, we have MAVCOM as well, whose role is still unclear.
How does this impact Malaysia? We have built a solid industry. I think it is time to be more vigilant and have the input from the right group of people for our aviation to grow.
Showing posts with label Malaysia Airport. Show all posts
Showing posts with label Malaysia Airport. Show all posts
Wednesday, November 13, 2019
Sunday, October 20, 2019
Why Airasia is winning its local fight and that's hugely important
I have not written on Airasia for a long while, as over the last 18 months, its business has taken a strategic operational direction change. The group has moved into not owning its planes largely, getting hugely aggressive in its digital initiatives. I have to admit, it is hard to measure its digital initiatives when in the market we have Grab which was valued at $14 billion while Airasia as a whole is barely $1.5 billion.
At the same time, Airasia which is operating in markets such as Malaysia, Indonesia, Thailand, Philippined, India and Japan is growing aggressive. By not owning planes, it has rooms to grow more aggressively as long as it can keep its operational cashflow strong. This is what Airasia has been able to do despite growing strong. As an example, its operational cashflow for last 2 quarters combined was RM1.252 billion. Assuming it can keep up to the trend, the business is operating at close to 3x Price / EBIDA or Price / Operational Cashflow.
Without the high spending on capital expenditure as it now do not buy planes, the price it is trading at is hugely attractive. As a result, I am not sure why most analysts are putting down the price of the company.
Airasia's biggest tradeoff actually is the weak Asian currency (except for Thai Baht) as its leasing and fuel costs are in USD. The good part is that all its competitors are facing the same situation. Scoot, one of its closest competitor may have a slight advantage as SGD seems to be stronger and its parent flies globally where it can earn USD and Euro.
However, those are not the biggest factor to Airasia. I seem to think that Airasia, with its management can control its ownself if it is operating in an environment that is based on free competition i.e. open skies. Airasia, unfortunately is not operating in this environment. To sum up its founder closely, Airasia is operating in a hugely regulated environment. To make matters worse, the airports operations in this region is largely monopolised and regulated.
In the past, and up until today, Airasia's largest base is KLIA2 and it is not getting the support from its airport partner. If I am a Tesco, and I rent 95% of the space and bring 97% of the traffic to my property owner. However, I am consistently in dispute with my owner, how would investors think. My owner consistently would like to increase my fees. I have no other options as airport operations license is given to only one operator.
Even then, I am still able to turn a decent profit. We have MAVCOM which was created in 2015 and it seems to think Airasia's business concept is the same as other airlines. MAHB seems to be able to understand Outlet Mall concept as it ties up with Mitsui to operate one, but when comes to airports it is not able to think so. Emirates and Qatar Airlines does not mind paying for a premium service equivalent airport, but Airasia does not mind the no-frills airport. The food outlets are the added convenience - not as a mean to attract traffic. This thinking is conveniently ignored by MAHB.
The National Transport Plan is working to readdress the situation. It is recognizing the impact of a low frills airline and has plans to consolidate the regulators i.e. Civil Aviation Authority of Malaysia (CAAM) and MAVCOM.
Hopefully that is a beginning for a locally developed airline that one that is able to expand overseas to have a good local base. Just like many huge international companies getting their government to support them in their own countries so that they are strong enough to grow beyond its home.
At the same time, Airasia which is operating in markets such as Malaysia, Indonesia, Thailand, Philippined, India and Japan is growing aggressive. By not owning planes, it has rooms to grow more aggressively as long as it can keep its operational cashflow strong. This is what Airasia has been able to do despite growing strong. As an example, its operational cashflow for last 2 quarters combined was RM1.252 billion. Assuming it can keep up to the trend, the business is operating at close to 3x Price / EBIDA or Price / Operational Cashflow.
Without the high spending on capital expenditure as it now do not buy planes, the price it is trading at is hugely attractive. As a result, I am not sure why most analysts are putting down the price of the company.
Airasia's biggest tradeoff actually is the weak Asian currency (except for Thai Baht) as its leasing and fuel costs are in USD. The good part is that all its competitors are facing the same situation. Scoot, one of its closest competitor may have a slight advantage as SGD seems to be stronger and its parent flies globally where it can earn USD and Euro.
However, those are not the biggest factor to Airasia. I seem to think that Airasia, with its management can control its ownself if it is operating in an environment that is based on free competition i.e. open skies. Airasia, unfortunately is not operating in this environment. To sum up its founder closely, Airasia is operating in a hugely regulated environment. To make matters worse, the airports operations in this region is largely monopolised and regulated.
In the past, and up until today, Airasia's largest base is KLIA2 and it is not getting the support from its airport partner. If I am a Tesco, and I rent 95% of the space and bring 97% of the traffic to my property owner. However, I am consistently in dispute with my owner, how would investors think. My owner consistently would like to increase my fees. I have no other options as airport operations license is given to only one operator.
Even then, I am still able to turn a decent profit. We have MAVCOM which was created in 2015 and it seems to think Airasia's business concept is the same as other airlines. MAHB seems to be able to understand Outlet Mall concept as it ties up with Mitsui to operate one, but when comes to airports it is not able to think so. Emirates and Qatar Airlines does not mind paying for a premium service equivalent airport, but Airasia does not mind the no-frills airport. The food outlets are the added convenience - not as a mean to attract traffic. This thinking is conveniently ignored by MAHB.
The National Transport Plan is working to readdress the situation. It is recognizing the impact of a low frills airline and has plans to consolidate the regulators i.e. Civil Aviation Authority of Malaysia (CAAM) and MAVCOM.
Hopefully that is a beginning for a locally developed airline that one that is able to expand overseas to have a good local base. Just like many huge international companies getting their government to support them in their own countries so that they are strong enough to grow beyond its home.
Monday, November 5, 2018
One can see that Maybank analyst is targeting Airasia
There is definitely going to be impact onto aviation business with the introduction of levy for travellers by government, RM20 for ASEAN and RM40 for non-ASEAN. Local travelling, there will still be no levy.
However, in reading the release here by Maybank, I think the opinion is wrong. How can Airasia and Airasia-X be impacted while MAHB is not impacted?
MAHB's revenue is dependent on passenger traffic. If ever, MAHB is more affected than Airasia's revenue is only about 30% from Malaysia, whereas MAHB's bulk of revenue is on passenger traffic.
His analysis is wrong.
Part of the article from STAR is below:
Maybank Research said the departure levy will negatively impact AirAsia and AirAsia X’s passenger load as their passengers are perceived to be price sensitive.
Historical accounts are mixed regarding the impact of tax hikes on air travel; in Europe, it caused a multi-year traffic decline while in Hong Kong and Singapore, it merely reduced the traffic growth momentum ever so slightly.
“The jury is not yet out whether the departure levy will kill passenger demand,” it said.
Maybank Research said the tax burden for international air travel will rise by 49% (within Asean) and 51% (outside Asean).
MAHB is largely unaffected but it is negative for airlines.
However, in reading the release here by Maybank, I think the opinion is wrong. How can Airasia and Airasia-X be impacted while MAHB is not impacted?
MAHB's revenue is dependent on passenger traffic. If ever, MAHB is more affected than Airasia's revenue is only about 30% from Malaysia, whereas MAHB's bulk of revenue is on passenger traffic.
His analysis is wrong.
Part of the article from STAR is below:
Maybank Research said the departure levy will negatively impact AirAsia and AirAsia X’s passenger load as their passengers are perceived to be price sensitive.
Historical accounts are mixed regarding the impact of tax hikes on air travel; in Europe, it caused a multi-year traffic decline while in Hong Kong and Singapore, it merely reduced the traffic growth momentum ever so slightly.
“The jury is not yet out whether the departure levy will kill passenger demand,” it said.
Maybank Research said the tax burden for international air travel will rise by 49% (within Asean) and 51% (outside Asean).
MAHB is largely unaffected but it is negative for airlines.
Monday, July 10, 2017
Airasia is just killing competitors locally
When I wrote the article on Airasia and MAHB working together, I meant to be for both to do well. You know whenever I read the monthly traffic report by MAHB, there is feeling that MAHB just wanted Airasia not to be doing well. That strategy just failed although Malindo and MAS probably treat the MAHB people better. (I am just speculating but that is a norm - especially when dealing with a Group CEO like Airasia who can be difficult and loud.) Why I say this, just read the report by MAHB - it may sound neutral but it is not.
But just look at these numbers as above for example which came out today (10 July 2017). Airasia is delivering and taking up market share. If you look at the ones on yellow box, one can already see it. Which airline does local flights in KLIA2? Airasia only. Which airlines do local flights in Malaysia through KLIA Main? MAS and Malindo. Airasia's June 2017 against June 2016's number grew 16.6% while those that went through KLIA Main dropped (surprise? - as this is a Raya month for 2017 as against 2016 which was in July 2016)
Note: It is harder to analyse numbers for KLIA Main as all other airlines use that terminal as against only Airasia, Airasia X and perhaps Tiger and Jetstar use KLIA2 (in a small way i.e. flight from Singapore)
Perhaps some of the traffic went to the international flights for MAS and Malindo as they probably have reduced their quantum of local flights in Malaysia. Or it could also be their load factor just dropped.
Just note that one should not look at year to date numbers or LTM numbers for comparison as Malindo moved from KLIA2 to KLIA Main last year 14 March.
Let me tell you - based on my observation (and not just from the above table) - Airasia is just flying in terms of bringing traffic as against its main competitors. For Airasia, it is not just load factor that has gone up but also its margin from higher ticket prices and lower fuel costs (as against several years ago). The main costs for Airasia that has gone up is the higher purchase price (from foreign exchange) for new planes and staffs costs. But yet again that happens to its competitors as well. The new planes that it brought is apparently this time is not to replace the old ones but to increase its total seats - and that is because it cannot meet new demand.
I am not just optimistic on Airasia because of my investment that I made 2 years ago but because they are continuously outperform my expectation. I think the message to MAHB is to just face it - Airasia is to dominate in the future - it will probably do the company well - unless higher traffic and profitability is not the main agenda for MAHB.
Note: It is harder to analyse numbers for KLIA Main as all other airlines use that terminal as against only Airasia, Airasia X and perhaps Tiger and Jetstar use KLIA2 (in a small way i.e. flight from Singapore)
Perhaps some of the traffic went to the international flights for MAS and Malindo as they probably have reduced their quantum of local flights in Malaysia. Or it could also be their load factor just dropped.
Just note that one should not look at year to date numbers or LTM numbers for comparison as Malindo moved from KLIA2 to KLIA Main last year 14 March.
Let me tell you - based on my observation (and not just from the above table) - Airasia is just flying in terms of bringing traffic as against its main competitors. For Airasia, it is not just load factor that has gone up but also its margin from higher ticket prices and lower fuel costs (as against several years ago). The main costs for Airasia that has gone up is the higher purchase price (from foreign exchange) for new planes and staffs costs. But yet again that happens to its competitors as well. The new planes that it brought is apparently this time is not to replace the old ones but to increase its total seats - and that is because it cannot meet new demand.
I am not just optimistic on Airasia because of my investment that I made 2 years ago but because they are continuously outperform my expectation. I think the message to MAHB is to just face it - Airasia is to dominate in the future - it will probably do the company well - unless higher traffic and profitability is not the main agenda for MAHB.
Airasia and MAHB should just communicate more
It seems we have no choice and Airasia has less choice as well. Most of Malaysian airports are operated by a single operator - MAHB and that will not change in the next 5 - 10 years. There are (almost) no competitors. The entire KLIA2 seems to be for Airasia and Airasia X. I know Airasia is now a regional airlines and they could have focus their energy and routes into Thailand, Philippines or India for example, but MAHB is not stupid to know that Malaysia is probably still the most profitable base for Airasia.
I was at KLIA2 a week ago, and I noticed the self check-in machine can now print baggage tags. From this, I thought that I do not need to queue to check in my luggage anymore, but that is not so. I was telling the Airasia's staff that was assigned to help those to do self check-in that the printing of tags does not change anything as I still have to queue to to deliver my bags. She agreed. As I would have thought, there is a missing step which Airasia would pursue in the future.
From reading the below article (http://www.thesundaily.my/news/2017/07/09/tony-fernandes-slams-mahb-allegedly-failing-provide-bag-drop-machines), I guess now what the self-service printing of tags are for. In some airports, once can actually do self check in of bags, hence reducing manpower costs - i.e. part of better automation which we need.
I was at KLIA2 a week ago, and I noticed the self check-in machine can now print baggage tags. From this, I thought that I do not need to queue to check in my luggage anymore, but that is not so. I was telling the Airasia's staff that was assigned to help those to do self check-in that the printing of tags does not change anything as I still have to queue to to deliver my bags. She agreed. As I would have thought, there is a missing step which Airasia would pursue in the future.
From reading the below article (http://www.thesundaily.my/news/2017/07/09/tony-fernandes-slams-mahb-allegedly-failing-provide-bag-drop-machines), I guess now what the self-service printing of tags are for. In some airports, once can actually do self check in of bags, hence reducing manpower costs - i.e. part of better automation which we need.
Tony Fernandes slams MAHB for allegedly failing to provide bag drop machines
PETALING JAYA: AirAsia Group CEO Tan Sri Tony Fernandes has criticised Malaysia Airports Holdings Bhd (MAHB) for its failure to offer the low-cost carrier baggage facilities at its airports throughout the country.
Expressing that he was "fed up" with MAHB, Fernandes claimed that the airport operator had promised 30 bag drop machines this month.
"Zero and now they say no budget!!!!!!!!," he said in a Facebook posting yesterday.
Fernandes also claimed that AirAsia Bhd CEO Aireen Omar had offered to pay for the machines two years ago, but MAHB had insisted on providing the facilities.
Calling on MAHB not to behave like a "monopoly", he further praised the Senai Airport in Johor, describing it as a "hard working private entrepreneurial".
The airport is currently operated by Senai Airport Terminal Services Sdn Bhd and one of the few in the country not operated by MAHB.
"We need more 'Senai airports' in Malaysia. Create more entrepreneurs. More economic activity. Hope the new (MAHB) chairman Tan Sri Syed Zainol Anwar Syed Putra Jamalullail and (MAHB chief strategy officer) Azli (Mohamed) will sort out the mess," he said.
My reading of this is also bringing to me that actually there is very little communication between MAHB and Airasia. I think both are at fault as it could have been resolved amicably. I know and I have also complained before MAHB is really monopolistic in behaviour, but that is what we have to put up with in Malaysia. Unless, Airasia does not intend to operate Malaysia as a significant base.
As mentioned, Airasia has some negotiation power as it is not an airline that is dependent on Malaysia alone - but still close to 50% of its passengers are using Malaysian airports (those that are run by MAHB). I guess both parties have to suck it up - and I have to admit it will not be easy to do for both the bosses - as MAHB can really act like any Malaysian GLCs.
Wednesday, April 1, 2015
Sold Airport and Bought TA Enterprise
Just sold all the Airport stocks and bought more of TA Enterprise.
I have bought some of TA Enterprise shares before and it was proven to be largely unsuccessful over the short run. The shares which I have bought now dropped to RM0.695. As mentioned before, TA is a defensive stock with strong overseas assets. With the decrease in Malaysian currencies, I would think that these overseas assets would worth more. However, as it also has substantial foreign currencies loans, I would believe those differences would not be that substantial anymore. It sort of even out.
The announcement made yesterday over its latest quarterly performance, I guess cause its shares to drop 7.33% today. This is because it registered a loss before tax of RM23.8 million for the quarter. However, while we are shocked by this, do read what it has to announce. Let's just focus on the two divisions - investment holding and credit and lending.
The Group reported loss before tax of RM23.8million and revenue of RM232.0million for the current fourth quarter, compared to profit before tax of RM40.5million and revenue of RM281.7million respectively achieved in the previous year’s corresponding quarter. Credit and lending and investment holding are the main divisions that caused the drop in Group’s results in the current fourth quarter. The performance of the Group, analysed by its key operating segments is as follows:-
Investment holding for 4Q2015
Investment holding division reported loss before tax of RM66.7million in the current year’s fourth quarter, as compared to profit before tax of RM34.3million in the previous year’s corresponding quarter. Despite higher investment interest income, the current year’s fourth quarter results was dragged down by foreign exchange losses realized upon the dissolution of foreign subsidiaries and fair value loss on investment securities. For the current year-to-date, this division reported loss before tax of RM58.0million, as compared to loss before tax of RM2.6million in the preceding year. Despite higher investment interest income and fair value gain on derivatives, current year’s loss before tax was higher primarily attributable to higher fair value loss on investment securities, and acquisition related cost incurred.
Credit and lending for 4Q2015 i.e. latest quarter
For the current year’s fourth quarter, credit and lending division contributed RM29.9million profit before tax to the Group, as compared to profit before tax of RM72.2million in the previous year’s corresponding quarter. Despite higher investment interest income, current year’s fourth quarter results was dragged down by higher fair value loss on derivative and investment securities, and lower loan recovery income. This division achieved a current year-to-date profit before tax of RM154.9million, as compared to RM107.3million in the preceding year. Despite higher fair value loss on derivatives and investment securities, the division’s performance was boosted by loan recovery, foreign exchange gain on translation of AUD and CAD denominated balances, and higher investment interest income.
What was reported for 4Q2014
Credit and lending For the current year’s fourth quarter, credit and lending division contributed RM68.1 million profit before tax to the Group, as compared to profit before tax of RM1.7million in the previous year’s corresponding quarter. For the current year-to-date, this division achieved profit before tax of RM104.0million, as compared to RM19.4million in the preceding year. This division enjoyed higher revenue and profit before tax resulted from loan recovery, gain on sale of investment securities, investment interest income, and foreign exchange translation gain on CAD and AUD denominated inter-co balances.
What do we noticed from what was picked up? These are cyclical in nature mainly due to fluctuations in currencies exchange and investment securities as TA held a large portion of its assets through investments securities.
Just to note, do look below - the fair value loss on investments was RM93 million
As against for the previous year:
See the difference! These are mainly accounting in nature as long as these investments are to be held over a longer period.
I have bought some of TA Enterprise shares before and it was proven to be largely unsuccessful over the short run. The shares which I have bought now dropped to RM0.695. As mentioned before, TA is a defensive stock with strong overseas assets. With the decrease in Malaysian currencies, I would think that these overseas assets would worth more. However, as it also has substantial foreign currencies loans, I would believe those differences would not be that substantial anymore. It sort of even out.
The announcement made yesterday over its latest quarterly performance, I guess cause its shares to drop 7.33% today. This is because it registered a loss before tax of RM23.8 million for the quarter. However, while we are shocked by this, do read what it has to announce. Let's just focus on the two divisions - investment holding and credit and lending.
The Group reported loss before tax of RM23.8million and revenue of RM232.0million for the current fourth quarter, compared to profit before tax of RM40.5million and revenue of RM281.7million respectively achieved in the previous year’s corresponding quarter. Credit and lending and investment holding are the main divisions that caused the drop in Group’s results in the current fourth quarter. The performance of the Group, analysed by its key operating segments is as follows:-
Investment holding for 4Q2015
Investment holding division reported loss before tax of RM66.7million in the current year’s fourth quarter, as compared to profit before tax of RM34.3million in the previous year’s corresponding quarter. Despite higher investment interest income, the current year’s fourth quarter results was dragged down by foreign exchange losses realized upon the dissolution of foreign subsidiaries and fair value loss on investment securities. For the current year-to-date, this division reported loss before tax of RM58.0million, as compared to loss before tax of RM2.6million in the preceding year. Despite higher investment interest income and fair value gain on derivatives, current year’s loss before tax was higher primarily attributable to higher fair value loss on investment securities, and acquisition related cost incurred.
Credit and lending for 4Q2015 i.e. latest quarter
For the current year’s fourth quarter, credit and lending division contributed RM29.9million profit before tax to the Group, as compared to profit before tax of RM72.2million in the previous year’s corresponding quarter. Despite higher investment interest income, current year’s fourth quarter results was dragged down by higher fair value loss on derivative and investment securities, and lower loan recovery income. This division achieved a current year-to-date profit before tax of RM154.9million, as compared to RM107.3million in the preceding year. Despite higher fair value loss on derivatives and investment securities, the division’s performance was boosted by loan recovery, foreign exchange gain on translation of AUD and CAD denominated balances, and higher investment interest income.
What was reported for 4Q2014
Credit and lending For the current year’s fourth quarter, credit and lending division contributed RM68.1 million profit before tax to the Group, as compared to profit before tax of RM1.7million in the previous year’s corresponding quarter. For the current year-to-date, this division achieved profit before tax of RM104.0million, as compared to RM19.4million in the preceding year. This division enjoyed higher revenue and profit before tax resulted from loan recovery, gain on sale of investment securities, investment interest income, and foreign exchange translation gain on CAD and AUD denominated inter-co balances.
What do we noticed from what was picked up? These are cyclical in nature mainly due to fluctuations in currencies exchange and investment securities as TA held a large portion of its assets through investments securities.
Just to note, do look below - the fair value loss on investments was RM93 million
As against for the previous year:
See the difference! These are mainly accounting in nature as long as these investments are to be held over a longer period.
Friday, March 27, 2015
Malaysian Airport's rights
I have decided to pick up the rights from Malaysia Airport's issues and applied for 92 units extra of excess to make up into board lot.
Below are the updated holdings of MAHB.
This shows that sometimes (not all the times), rights are beneficial to the shareholders, if one is looking at shorter term trading.
Below are the updated holdings of MAHB.
This shows that sometimes (not all the times), rights are beneficial to the shareholders, if one is looking at shorter term trading.
Friday, December 19, 2014
Moving from Airport to Keuro
I am buying more Keuro as I think the lower oil price will cause the construction material costs to lower. Other material costs such as steel is also significantly lower recently. I think it will have positive impact to the construction of West Coast Expressway.
On the other hand, I was not too happy with the purchase of an airport in Turkey by Malaysia Airport. As a result, I have decided to switch by having a bigger exposure to Keuro.
The latest update is as attached.
On the other hand, I was not too happy with the purchase of an airport in Turkey by Malaysia Airport. As a result, I have decided to switch by having a bigger exposure to Keuro.
The latest update is as attached.
Wednesday, May 21, 2014
KLIA2 a shopping complex?
This is the first time I visit KLIA2 - right smack at the busy time of between 10.00 am to 12.00 pm (may not be peak though). The general feeling is that it is more of a shopping complex than an airport. The shops are definitely closer to each other and hey! KFC (and several others) are just next to the check in counter. Food stores as usual are doing well, and as claimed by Airasia, they probably provide for 80% to 90% of the traffic by the number of flights departing and arriving.
I am looking for food but what is with the non-Malaysian food stalls? There seems to have much much more restaurants that sells non-Malaysian food. In fact, it is harder to find good Malaysian food here. If someone is to leave or just entered the country, they would want to have Malaysian delicacies right?
I do not know why Malaysia Airport's shares recently has dropped - probably due to Najib's comment of possibly let MAS to fold? But my guess is that KLIA2 is to provide a new impetus for Airport's earnings to spike despite what happened to MAS.
Note: MAS will not fold. It will be a General Motors like bankruptcy just to take care of the union issue, as MAS is a national airline. Let me know a country which does not have a national airline!
I am looking for food but what is with the non-Malaysian food stalls? There seems to have much much more restaurants that sells non-Malaysian food. In fact, it is harder to find good Malaysian food here. If someone is to leave or just entered the country, they would want to have Malaysian delicacies right?
I do not know why Malaysia Airport's shares recently has dropped - probably due to Najib's comment of possibly let MAS to fold? But my guess is that KLIA2 is to provide a new impetus for Airport's earnings to spike despite what happened to MAS.
Note: MAS will not fold. It will be a General Motors like bankruptcy just to take care of the union issue, as MAS is a national airline. Let me know a country which does not have a national airline!
Saturday, January 11, 2014
MAHB's dividend reinvestment
Just received the dividend reinvestment option from Malaysia Airport. As it is offered at RM8.06 and the share is being traded at RM8.75 as of yesterday.
It is a good option to take up. As below is the one I received. What one need to do is to put down how many units you would like to take up - in my case it is 16 units and send back to the address as in the envelope. Stamp duty not needed.
On Airport's potential, despite the challenges for 2014, I believe that with Visit Malaysia Year 2014 and more people warming to the idea of travelling either for business or leisure - they will do well.
This year is also the year where KLIA2 will open. This means that potentially low costs airlines will ramp up the number of planes that will use KLIA which is good for Airport. There are much larger retail space as well.
It is a good option to take up. As below is the one I received. What one need to do is to put down how many units you would like to take up - in my case it is 16 units and send back to the address as in the envelope. Stamp duty not needed.
On Airport's potential, despite the challenges for 2014, I believe that with Visit Malaysia Year 2014 and more people warming to the idea of travelling either for business or leisure - they will do well.
This year is also the year where KLIA2 will open. This means that potentially low costs airlines will ramp up the number of planes that will use KLIA which is good for Airport. There are much larger retail space as well.
Friday, September 27, 2013
Why Malaysia Airport will be fantastic
You think that the airport business is an old, lazy, uninteresting business. Not so in Asia and especially Malaysia. The competition among airlines (not airports) I guess has caused traffic to increase by leaps and bounds to the Malaysian airports.
Some statistics just as reported today.
And the commentary from the company itself:
"Malaysia Airports handled 7.27 million passenger movements, an increase of 27.8% over August 2012. It is a record high for the system of airports surpassing the 7million mark for the first time and being the highest passenger movements achieved for a month to date. Before 2013, the previous highest record achieved was 6.57 million recorded in December 2012 which traditionally has been the highest passenger movements month. Encouragingly May, June and August 2013 also outperformed December 2012. International passengers reached 3.45 million, registering a 25.1% year-on-year increase while domestic passengers recorded 30.4% growth with 3.82 million passengers. The sound performance in particular for the domestic sector was unexpected as Hari Raya Festive Season also fell on the same month last year with a double digit growth of 13.1%. This is a double digit growth over the previous double digit growth in August 2012. The longer school holidays complemented by competitive air fares and sufficient seat capacity partly contributed to the remarkable growth. It is encouraging to note that the international sector’s equal credible growth was driven by inbound tourists that have gained momentum backed by tourism campaign for VMY 2014, new airlines operation, additional airlines’ seat capacity and oneworld effect. With the oneworld alliance and higher transfers within AirAsia group, the monthly transfer traffic at KL International Airport has increased by about 100,000 per month and it is increasing from month to month."
Like I have said before, while the airlines are fighting themselves out - Malaysia Airport is enjoying. A simple business - in fact a monopoly if you look at it. Nothing difficult, but sometimes in life we just have to accept and get on with it as I do not like monopolies either. How hard it is to clean the airport toilet, manage air-traffic, mop and polish the floors, manage some tenants.
The harder part is to compete for customers but this is apparently not the job of Malaysia Airport but Airasia, Malindo, Cathay Pacific etc. Of course, Malaysia Airport does pretty well in bringing in additional airlines but that is still easier as compared to what the airlines have to compete on.
Some statistics just as reported today.
And the commentary from the company itself:
"Malaysia Airports handled 7.27 million passenger movements, an increase of 27.8% over August 2012. It is a record high for the system of airports surpassing the 7million mark for the first time and being the highest passenger movements achieved for a month to date. Before 2013, the previous highest record achieved was 6.57 million recorded in December 2012 which traditionally has been the highest passenger movements month. Encouragingly May, June and August 2013 also outperformed December 2012. International passengers reached 3.45 million, registering a 25.1% year-on-year increase while domestic passengers recorded 30.4% growth with 3.82 million passengers. The sound performance in particular for the domestic sector was unexpected as Hari Raya Festive Season also fell on the same month last year with a double digit growth of 13.1%. This is a double digit growth over the previous double digit growth in August 2012. The longer school holidays complemented by competitive air fares and sufficient seat capacity partly contributed to the remarkable growth. It is encouraging to note that the international sector’s equal credible growth was driven by inbound tourists that have gained momentum backed by tourism campaign for VMY 2014, new airlines operation, additional airlines’ seat capacity and oneworld effect. With the oneworld alliance and higher transfers within AirAsia group, the monthly transfer traffic at KL International Airport has increased by about 100,000 per month and it is increasing from month to month."
Like I have said before, while the airlines are fighting themselves out - Malaysia Airport is enjoying. A simple business - in fact a monopoly if you look at it. Nothing difficult, but sometimes in life we just have to accept and get on with it as I do not like monopolies either. How hard it is to clean the airport toilet, manage air-traffic, mop and polish the floors, manage some tenants.
The harder part is to compete for customers but this is apparently not the job of Malaysia Airport but Airasia, Malindo, Cathay Pacific etc. Of course, Malaysia Airport does pretty well in bringing in additional airlines but that is still easier as compared to what the airlines have to compete on.
Tuesday, June 18, 2013
Running an airport is easy but...
To directly quote the COO of Philippines Airline and President of San Miguel Corp, Ramon Ang on CNBC, "Even my high school son can run an airport. It's easy. You just have to hire the right people."
Is it that easy? It is easy now it seems as the competition internally among the airports are almost non-existence. It is easy when the rates are fixed by the government. Hence, whenever the airlines are pushing hard for your dollars, the airport makes money. The hard selling part are not by the airports but the airlines. It is easy when you have Airasia, Malindo, not MAS though. It is easy when there are more people whom are looking forward to travelling when flying is made cheaper.
Now, when it is easy, one cannot help thinking it is even easier to negotiate a good contract especially for Malaysia Airport. I am reading an old article where it says the LAD (Liquidated and Ascertained Damages) could be as high as RM4 to RM million a month for the delays. RM4 - RM6 million is hardly a decent LAD sum.
I am aware that with the KLIA2, Malaysia Airport will be the main beneficiary out of this as the low costs airlines are already delaying their plans where the current LCCT is already choked. I have yet to see how the KLIA2 will be different from the main airport terminal in Sepang, but the grand plan and size will definitely be positive for its earnings.
I know it can be easy as what Ramon Ang says, but one can for sure negotiate for a better contract...
So the LAD as announced below of RM199,445.40 comes to about RM6 million a month. My feel is this is way too small for both UEM and MAHB.
Is it that easy? It is easy now it seems as the competition internally among the airports are almost non-existence. It is easy when the rates are fixed by the government. Hence, whenever the airlines are pushing hard for your dollars, the airport makes money. The hard selling part are not by the airports but the airlines. It is easy when you have Airasia, Malindo, not MAS though. It is easy when there are more people whom are looking forward to travelling when flying is made cheaper.
Now, when it is easy, one cannot help thinking it is even easier to negotiate a good contract especially for Malaysia Airport. I am reading an old article where it says the LAD (Liquidated and Ascertained Damages) could be as high as RM4 to RM million a month for the delays. RM4 - RM6 million is hardly a decent LAD sum.
I am aware that with the KLIA2, Malaysia Airport will be the main beneficiary out of this as the low costs airlines are already delaying their plans where the current LCCT is already choked. I have yet to see how the KLIA2 will be different from the main airport terminal in Sepang, but the grand plan and size will definitely be positive for its earnings.
I know it can be easy as what Ramon Ang says, but one can for sure negotiate for a better contract...
So the LAD as announced below of RM199,445.40 comes to about RM6 million a month. My feel is this is way too small for both UEM and MAHB.
Monday, April 15, 2013
Airport's Dividend Reinvestment Plan - What to do?
I remember I was questioned twice on the Malaysia Airport's Dividend Reinvestment Plan. Well, here I am going to go to basics on what to do with it.
Today's Malaysia Airport closing price - RM5.72
Dividend declared per share - RM0.0763
Reinvestment Option price - RM5.14
In today's announcement, here is part of the form as announced.
Now, see the closing price of RM5.72 is way higher than the reinvestment option price at RM5.14.
I am going to take the option of reinvestment plan. Based on Felice's Fund, I am entitled to RM0.0763 x 2,126 = RM162.21 dividend.
However as I am taking the option of reinvesting the dividend, I shall take a total new Airport's shares of
31 shares @ RM5.14 = RM159.34.
Hence, I am taking 31 new shares and a paltry sum of cash totalling RM162.21 - RM159.34 = RM2.87.
Today's Malaysia Airport closing price - RM5.72
Dividend declared per share - RM0.0763
Reinvestment Option price - RM5.14
In today's announcement, here is part of the form as announced.
Now, see the closing price of RM5.72 is way higher than the reinvestment option price at RM5.14.
I am going to take the option of reinvestment plan. Based on Felice's Fund, I am entitled to RM0.0763 x 2,126 = RM162.21 dividend.
However as I am taking the option of reinvesting the dividend, I shall take a total new Airport's shares of
31 shares @ RM5.14 = RM159.34.
Hence, I am taking 31 new shares and a paltry sum of cash totalling RM162.21 - RM159.34 = RM2.87.
Thursday, January 17, 2013
Stansted Airport and why I feel weird
Now that we know Malaysia Airport is officially one of the bidder for Stansted Airport in London. What we do not know is that whether YTL is a party to it. Let's assume anyway it is and Malaysia Airport will be taking a 20% stake. This bid is competing against 2 other bidders - the Manchester Airport group and another Australian group which has Sydney Airport as its assets. Hence, to say that nobody wants Stansted is not true as there are 3 bidders.
Where does Stansted stands among the airports in London
We know that there are 3 main airports in London and Stansted is the smallest among the three. Among airports in UK, Stansted is No.4 along the pecking order of Heathrow, Gatwick, Manchester. BAA who is the owner of Stansted is being forced to relinquish Stansted due to anti-competitive ruling by the regulators. Few years ago, BAA (which used to own as well) sold Gatwick to another consortium, hence Gatwick is a direct competitor to Heathrow now.
Based on the below statistics which I managed to gather from each airports' reported numbers, we can see that the passenger growth is not particularly outstanding. One must remember 2012 was the London Olympics year, hence we can take a few percentage from the 2012 numbers.
Of course UK as in all other parts of Europe is facing severe economic troubles and passenger traffic is a subset to that problem the continent faces. Stansted actually consists of less than 10% of total London passengers traffic - hence the swing can be substantial to the airport depending on the execution. And if you look at the numbers in detail again, Stansted's numbers actually shrunk from 22 million in 2005 to 17.5 million in 2012. What is the major cause to that?
BAA few years ago actually had greater plans for Stansted. It in fact wanted to invest more by upgrading the facilities in Stansted with another runway in the plan. That sort of halted when it ran into issues where it cannot own more than 1 airport in London, hence this plan was shelved. That issue with the regulators caused BAA to concentrate on Heathrow being the largest international airport by far and it was in fact presented in its report to the shareholders for many years that it was going to focus on Heathrow.
That was probably the reason why Stansted is facing deterioration in passenger numbers. Another thing that we know is that Ryanair is the main customer for Stansted accounting for 70% of the load. In fact, Ryanair was one of the interested party which wanted to put in a bid but was blocked from doing so. Another main customer to Stansted is EasyJet, the other successful low costs airline in Europe.
Stansted being an airport for leisure, low costs airlines has always felt the pressure from its main customers, the low costs airlines themselves. Low costs airlines thrive from their size - negotiation power, high turnaround time and pressure on prices to all their suppliers. The fact that it is 70% Ryanair is one red flag by itself. If you look at the highly successful operator, if the CEO can sort of threaten Boeing to reduce its aircraft prices, and commercial aircraft manufacturing is a duopoly industry - tell me how much he can threaten Stansted. He in fact has done before (by pulling some of the flights away from Stansted to other airports, hence the lower traffic) and will continue to do so. Anytime, he sees Stansted making higher profits, he will put pressure on pricing - that's I think how powerful they are.
That characteristic smacks similarities to our own LCCT in Malaysia where Airasia is the main traffic creator to LCCT. In fact, I dare to say without Airasia, LCCT is probably not needed and there's no KLIA2. We also know that Malaysia Airport is backed by the government (and in fact majority owned) - Malaysia Airport despite the war of words with Tony Fernandez, nothing much Airasia can do as all airports surrounding are managed by one single company. Airasia had one time threatened to build another airport with Sime Darby if you can remember. I felt that Malaysia Airport did not handle the Airasia issue too well and definitely it may not be able to handle Micheal O'Leary who thrives on that. Can YTL handle that being the 80% consortium holder? Probably not, this CEO of Ryanair whom even had the guts to reduce air traffic to his own country, Ireland due to what he claims unfair practices - he can do a lot to the air traffic industry in Europe. He can increase and reduce traffic to parts of Europe if he wants to - as he has planes, strong pricing power, reach and ultimately negotiation power. I would not want to handle someone like him...but may want to look at his shares.
Now - this is what I think YTL and Malaysia Airport wanted to do if they win the Stansted bid. Expansion. Reducing costs as BAA probably did not do too well with that. Reduce the dependence on a single airline like Ryanair. Or work well with them. Can they do that is the question?
British Pound is getting cheaper relative to other currencies could also be a factor. And we also know that YTL has been parking assets out of Malaysia...hmmm...but why Malaysia Airport? Fees paid for managing the airport? Is YTL paying a good fee?
For shareholders of YTL, if the company has assets mostly overseas, I can see possibilities of reduction in dividends as most companies do not want to repatriate money back here to pay dividends. Sometimes, there are tax implications - not all the times though. Have to question the management.
Where does Stansted stands among the airports in London
We know that there are 3 main airports in London and Stansted is the smallest among the three. Among airports in UK, Stansted is No.4 along the pecking order of Heathrow, Gatwick, Manchester. BAA who is the owner of Stansted is being forced to relinquish Stansted due to anti-competitive ruling by the regulators. Few years ago, BAA (which used to own as well) sold Gatwick to another consortium, hence Gatwick is a direct competitor to Heathrow now.
Based on the below statistics which I managed to gather from each airports' reported numbers, we can see that the passenger growth is not particularly outstanding. One must remember 2012 was the London Olympics year, hence we can take a few percentage from the 2012 numbers.
 |
| Passenger traffic between 2005 - 2012 |
BAA few years ago actually had greater plans for Stansted. It in fact wanted to invest more by upgrading the facilities in Stansted with another runway in the plan. That sort of halted when it ran into issues where it cannot own more than 1 airport in London, hence this plan was shelved. That issue with the regulators caused BAA to concentrate on Heathrow being the largest international airport by far and it was in fact presented in its report to the shareholders for many years that it was going to focus on Heathrow.
That was probably the reason why Stansted is facing deterioration in passenger numbers. Another thing that we know is that Ryanair is the main customer for Stansted accounting for 70% of the load. In fact, Ryanair was one of the interested party which wanted to put in a bid but was blocked from doing so. Another main customer to Stansted is EasyJet, the other successful low costs airline in Europe.
Stansted being an airport for leisure, low costs airlines has always felt the pressure from its main customers, the low costs airlines themselves. Low costs airlines thrive from their size - negotiation power, high turnaround time and pressure on prices to all their suppliers. The fact that it is 70% Ryanair is one red flag by itself. If you look at the highly successful operator, if the CEO can sort of threaten Boeing to reduce its aircraft prices, and commercial aircraft manufacturing is a duopoly industry - tell me how much he can threaten Stansted. He in fact has done before (by pulling some of the flights away from Stansted to other airports, hence the lower traffic) and will continue to do so. Anytime, he sees Stansted making higher profits, he will put pressure on pricing - that's I think how powerful they are.
That characteristic smacks similarities to our own LCCT in Malaysia where Airasia is the main traffic creator to LCCT. In fact, I dare to say without Airasia, LCCT is probably not needed and there's no KLIA2. We also know that Malaysia Airport is backed by the government (and in fact majority owned) - Malaysia Airport despite the war of words with Tony Fernandez, nothing much Airasia can do as all airports surrounding are managed by one single company. Airasia had one time threatened to build another airport with Sime Darby if you can remember. I felt that Malaysia Airport did not handle the Airasia issue too well and definitely it may not be able to handle Micheal O'Leary who thrives on that. Can YTL handle that being the 80% consortium holder? Probably not, this CEO of Ryanair whom even had the guts to reduce air traffic to his own country, Ireland due to what he claims unfair practices - he can do a lot to the air traffic industry in Europe. He can increase and reduce traffic to parts of Europe if he wants to - as he has planes, strong pricing power, reach and ultimately negotiation power. I would not want to handle someone like him...but may want to look at his shares.
Now - this is what I think YTL and Malaysia Airport wanted to do if they win the Stansted bid. Expansion. Reducing costs as BAA probably did not do too well with that. Reduce the dependence on a single airline like Ryanair. Or work well with them. Can they do that is the question?
British Pound is getting cheaper relative to other currencies could also be a factor. And we also know that YTL has been parking assets out of Malaysia...hmmm...but why Malaysia Airport? Fees paid for managing the airport? Is YTL paying a good fee?
For shareholders of YTL, if the company has assets mostly overseas, I can see possibilities of reduction in dividends as most companies do not want to repatriate money back here to pay dividends. Sometimes, there are tax implications - not all the times though. Have to question the management.
Tuesday, January 15, 2013
YTL Cash Rich vs Malaysia Airport cash strapped
I was again reading something and just wanted to highlight - again reporting, reading and don't think vs thinking and able to analyze yourself makes a lot of difference. This article by The Star today is talking about the possibility of YTL and Malaysia Airport having a joint bid for Stansted Airport, UK for a sum of RM5 billion. It is again saying YTL is cash-rich while Airport is cash strapped. Read below where I pulled out a section from The Star's reporting:
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What is clear from checks with industry sources is that YTL Corp is very keen on holding the majority in the consortium and has sufficient funds for its equity portion. YTL Corp already owns UK's utility company Wessex Water Ltd and recently acquired hotels there. YTL Corp's Tan Sri Francis Yeoh and MAHB's Tan Sri Bashir Ahmad are very much involved in the deal to buy Stansted.If their bid is successful, it will add to the list of Malaysian corporate acquisitions of iconic UK assets, following last year's acquisition coup by the SP Setia-Sime Darby-Employees Provident Fund consortium of the Battersea Power Station project.While putting up the equity portion for the bid is less of a problem for cash-rich YTL Corp, does MAHB have sufficient firepower for coming up with its RM1bil (£200mil) portion?Sources told StarBiz that MAHB can manage that amount and had the funding plans for that. However, it might not be able to spend more than that on the Stansted bid, the sources added.
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If this bid is true, YTL will need to pull out RM4 billion while Airport will need to fork out RM1 billion. Let me pull out balance sheet of both companies and let us analyze.
 |
| Latest Current Asset portion of YTL |
YTL's liability and equity
 |
| Debt of YTL and Equity |
Airport's Current Assets
Airport's Debt and Equity
 |
| Airport's Debt and Equity |
I have actually did a simple debt / equity table, please see below.
 |
| YTL and Airport Net Debt / Equity |
Assuming the project is won at RM 5 billion, whose balance sheet actually looks better? Look at the lower portion. YTL's net debt / equity of 1.30x vs Airport's net debt / equity of 0.64x assuming it uses debt financing to fully finance its bid. YTL's way above gearing of more than 1 vs Airport's gearing of below 1. So who is actually having a stronger balance sheet here?
Of course I may not be agreeable for Airport to bid for a project which it owns only 20% especially in London (wonder why more Malaysian companies go London???). To me, Airport should just concentrate on KLIA2 as there is quite a bit of cashflow from there coming in near future and what it needs to do first is to CONCENTRATE.
And of course, you can say that I am bias as I have Airport shares while I do not have YTL - but numbers don't lie. Keep saying you are cash rich is not going to change the numbers! Good enough bankers (and there are many) will definitely know how to read balance sheet and future cashflows.
To proof my point, do a search on Google, "YTL cash". You will see many misleading articles.
-----------------------------
Note: Sorry, for yesterday's article, I should have used net debt / equity in which net debt is (total debt - total cash and cash equivalent). In any case, the balance sheet for Airport is definitely in better condition.
To proof my point, do a search on Google, "YTL cash". You will see many misleading articles.
-----------------------------
Note: Sorry, for yesterday's article, I should have used net debt / equity in which net debt is (total debt - total cash and cash equivalent). In any case, the balance sheet for Airport is definitely in better condition.
Monday, December 24, 2012
Airport's Dividend Reinvestment Plan: Why bother?
Remember when I mentioned of me buying Malaysia Airport for its future growth as well as potential cashflow in the not too long future. I however am always mindful of companies like this, a monopoly which sometimes can have a wasteful mentality while continuing to be fed off other's hard work. Sometimes, doing fairly well can cause some companies to think of doing unnecessary things.
Well in this case, Malaysia Airport has announced a Dividend Reinvestment Plan a while ago and implementing it for its interim dividend of 6 sen. A Dividend Reinvestment plan is what it is in the name and it provides shareholders the option to choose between receiving the dividend in cash or get them reinvested in new shares of Airport - this time locked in at RM4.73 per share.
While provided with a choice is good as it allows shareholders with options, but to me it is just a waste of time and resources. Time means staffs time, while resources means wasting money on Investment Bank's fees (RHB), mailing fees i.e. stamps to Pos Malaysia etc.
If it needs to keep more cash, it just have to declare lower dividends - I am ok. If Khazanah (the major shareholder) needs more money, it can reduce its holdings by selling more shares. It's that simple.
Well in this case, Malaysia Airport has announced a Dividend Reinvestment Plan a while ago and implementing it for its interim dividend of 6 sen. A Dividend Reinvestment plan is what it is in the name and it provides shareholders the option to choose between receiving the dividend in cash or get them reinvested in new shares of Airport - this time locked in at RM4.73 per share.
While provided with a choice is good as it allows shareholders with options, but to me it is just a waste of time and resources. Time means staffs time, while resources means wasting money on Investment Bank's fees (RHB), mailing fees i.e. stamps to Pos Malaysia etc.
If it needs to keep more cash, it just have to declare lower dividends - I am ok. If Khazanah (the major shareholder) needs more money, it can reduce its holdings by selling more shares. It's that simple.
Tuesday, December 11, 2012
Malaysia Airport has a strong case
Generally, I do not really favor a business that largely depends on rent for revenue. This is especially so for Malaysia Airport ("MAB"). I always felt that it is a monopoly and that position itself is no good for business. MAB is a monopoly allright but when comes to competing against other airports around the region it is not. Within Malaysia, it is probably the only player in town (except for Senai, I think).
Over the years, I have to admit that MAB has done very well - depending largely on the rise of low cost carrier business in Asia especially. I looked at MAB more than a year ago - and at that time it was trading close to RM7.00. Felt that it was overpriced although I already liked the business during then.
On the business of airport, the success of MAB is very dependent on Airasia's hardwork. There are expected new competition from Malindo although I am yet to be convinced of it doing well in a market where Airasia is becoming very dominant. If you go to LCCT (low cost carrier terminal) in Sepang, one could not help to be mistaken that the airport is owned by Airasia itself. Such is that amount of traffic Airasia has brought to the LCCT, but the main beneficiary sitting down and collecting toll is MAB. MAB is doing so well to the extent that for the last 8 years, it has not failed to grow - not one year. See below.
Rewind a few years back, although it may sound easy, the business of managing airports may not seem that simple. Let me bring you back to year 2003. A mediocre management will not be able to grow the revenue as seen in the stagnation of revenue below. Yes, it is probably due to the rise of low cost airlines after 2003 but a good manager will only allow a star player to shine. A poor manager will not be able to spot the talent or allow the talent to be groomed.
One may point to the quarrel between Airasia and MAB to the extent that at one point of time, there was a threat by Airasia to build its own airport in Nilai but this I think could be a thing of the past.
If you noticed, year 2003 was also a year of change in MAB. There was much changed in focus i.e. on running the airport operations well as it in later years sold off its F1 circuit and the management (as well as government) objectives became much clearer.
The write-up on the left is picked from the Chairman's statement in the Annual Report of MAB, and one could notice that MAB changed its management team mid 2003. Coincidentally, from 2004 onward, MAB's performance started to get better. To me, it is no coincident. There must be something in it.
In a business, it is much harder to convince people that the business or the managers have managed to turnaround or made them a lot better than convince on continuing the steady performances of some companies. This is why, it is much easier to convince that Nestle or Carlsberg will continue to do well than telling investors that there's already a change in performance (to the better) of MAB or a company like Time Dotcom where they have had bad past.
The biggest story in the near or medium term future for MAB though is not all of the above, but KLIA2. Despite all the hoo-hah about the costs overrun (or maybe overly expensive to build), is the potential it may bring. If one google on KLIA2, you would have noticed, the proposed initial retail space itself is more than 4 times the size of the current LCCT. It will be able to accommodate 3 times the traffic of the current LCCT. From there, looking at the growth prospect of Airasia, and bringing in several of its potential competitors, the revenue from KLIA2 is to grow exponential again - pretty much when LCCT opened in 2007 (despite the rush). This time, it is a serious one and KLIA2 will be able to accommodate for more space for the future as long as low cost carrier business continues to grow well. I think it will, as flying be it for business or holiday travel will continue to grow. MAB's business of renting out retail space I foresee will be doing very well too, if one notice the lack of space for retailers in the current LCCT. I am convinced.
On bringing more traffic, one need not be smart to know that Airasia will be planning for more planes as this is where its profits are mainly from. The rush for low costs will naturally allow it to grow - both MAB and Airasia (in fact MAB more due to its monopolistic nature). Look at SIA's sudden focus on regional flights as well as low costs focus in initiating Scoot. More people will fly, no doubt about it.
I am positive on MAB's future as long as it does not do anything stupid - and with that, I have bought some 2,100 units between RM5.29 and RM5.32.
Over the years, I have to admit that MAB has done very well - depending largely on the rise of low cost carrier business in Asia especially. I looked at MAB more than a year ago - and at that time it was trading close to RM7.00. Felt that it was overpriced although I already liked the business during then.
On the business of airport, the success of MAB is very dependent on Airasia's hardwork. There are expected new competition from Malindo although I am yet to be convinced of it doing well in a market where Airasia is becoming very dominant. If you go to LCCT (low cost carrier terminal) in Sepang, one could not help to be mistaken that the airport is owned by Airasia itself. Such is that amount of traffic Airasia has brought to the LCCT, but the main beneficiary sitting down and collecting toll is MAB. MAB is doing so well to the extent that for the last 8 years, it has not failed to grow - not one year. See below.
 |
| 5 years performance for Airport from 2007 - 2011 |
 |
| 4 years performance of MAB from 2000 - 2003 |
If you noticed, year 2003 was also a year of change in MAB. There was much changed in focus i.e. on running the airport operations well as it in later years sold off its F1 circuit and the management (as well as government) objectives became much clearer.
In a business, it is much harder to convince people that the business or the managers have managed to turnaround or made them a lot better than convince on continuing the steady performances of some companies. This is why, it is much easier to convince that Nestle or Carlsberg will continue to do well than telling investors that there's already a change in performance (to the better) of MAB or a company like Time Dotcom where they have had bad past.
The biggest story in the near or medium term future for MAB though is not all of the above, but KLIA2. Despite all the hoo-hah about the costs overrun (or maybe overly expensive to build), is the potential it may bring. If one google on KLIA2, you would have noticed, the proposed initial retail space itself is more than 4 times the size of the current LCCT. It will be able to accommodate 3 times the traffic of the current LCCT. From there, looking at the growth prospect of Airasia, and bringing in several of its potential competitors, the revenue from KLIA2 is to grow exponential again - pretty much when LCCT opened in 2007 (despite the rush). This time, it is a serious one and KLIA2 will be able to accommodate for more space for the future as long as low cost carrier business continues to grow well. I think it will, as flying be it for business or holiday travel will continue to grow. MAB's business of renting out retail space I foresee will be doing very well too, if one notice the lack of space for retailers in the current LCCT. I am convinced.
On bringing more traffic, one need not be smart to know that Airasia will be planning for more planes as this is where its profits are mainly from. The rush for low costs will naturally allow it to grow - both MAB and Airasia (in fact MAB more due to its monopolistic nature). Look at SIA's sudden focus on regional flights as well as low costs focus in initiating Scoot. More people will fly, no doubt about it.
I am positive on MAB's future as long as it does not do anything stupid - and with that, I have bought some 2,100 units between RM5.29 and RM5.32.
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