Malaysia Aiport cut to 'sell' as revamp taking too long

Kuala Lumpur (XFN-ASIA) - OSK Research said it is cutting its

recommendation on Malaysia Airport Holdings Bhd (MAHB) to a 'sell', with a target

price of 2.61 rgt as the airport operator's restructuring is not worth the wait.

"Even if (the restructuring is) announced by end-June, we believe we have already imputed reasonable terms into our assumptions.

"(And) with AirAsia already having 50 pct of the domestic air market, the 50 pct reduction in low cost carrier terminal (LCCT) taxes is a significant blow to MAHB," the research firm said in a note.

Transport Minister Chan Kong Choy recently announced that the passenger service charge for the LCCT at Kuala Lumpur

International Airport and Kota Kinabalu will be reduced to 6 rgt from the previous 9 rgt for domestic flights and to 25 rgt from 51 for international flights effective June 1.

In addition, with the Singapore Formula 1 race possibly starting next year, the attendance of the Sepang race,which has been loss-making for the last 3 years, may be further affected.

Visit Malaysia Year 2007 has 'certainly (been) nothing to shout about', it said.

"Looking at the traffic growth so far in the first quarter, international passenger traffic is up 4.4 pct, while domestic traffic is down 4.7 pct.

"We are still hopeful for a spurt in growth in the summer months but revise down our growth estimate from 9 pct to 7 pct on the international side," it added.

OSK said it expects MAHB to record investment income of 9 mln rgt from its recently won right to advise on the management of Astana airport in Kazakhstan.

"Having also bid in Saudi, Jordan and Oman for management contracts, this would be the only catalyst for an earnings upgrade in our view," it said.

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