Let’s not beat around the bush—Malaysia Airports Holdings Berhad (MAHB) has never hit RM11 per share. That’s true. But here’s the kicker: that doesn’t mean it won’t. In fact, at the pace MAHB is going, combined with its deeply undervalued assets, RM11 could easily be surpassed by next year. So why is it being offered at this price now?

RM11 offer…grossly undervalued

Take a good look at MAHB’s assets. We’re talking about a 45-year concession that generates a whopping RM1.3 billion in EBITDA annually, with steady growth rates and a low weighted average cost of capital (WACC). Then there’s the Istanbul Sabiha Gökçen International Airport in Turkey, pulling in free cash flow of 150 million euros per year. And let’s not forget the 8,537 acres of prime land in Aeropolis, a goldmine waiting to be fully tapped, valued at RM25 per square foot with a gross development value (GDV) of RM33 billion. Add to that the cash MAHB has on hand, and even after deducting debts, the company is worth a staggering RM27 billion. That puts the fair value of its shares at RM16 to RM18, at the very least.

And what are the acquirers offering? RM11 per share, which translates to a total market capitalisation of RM18 billion. It’s baffling.

RM11: A number that stinks of incompetence or something more?

Let’s be clear: this isn’t just about numbers on a balance sheet. This stinks of either sheer incompetence or something much worse. How else can one explain selling off one of Malaysia’s most valuable assets at a price that is so far below its true value? Are we really to believe that the key players involved in this deal—Khazanah Nasional, GIP, and BlackRock—are unaware of MAHB’s real worth? Or are they hoping that this undervaluation will slip under the radar?

KLIA needs help—but is GIP the right choice?

Yes, Kuala Lumpur International Airport (KLIA) has its issues. From long immigration queues to aerotrain delays and baggage handling problems, something needs to be done to elevate KLIA’s standards. But does GIP have the track record to handle such a task? That’s highly debatable.

Let’s examine GIP’s portfolio: London Gatwick Airport, Edinburgh Airport, and Sydney Airport. While these are prominent names, their performance under GIP’s management has been far from stellar. Take London Gatwick, for instance—while it’s the busiest single-runway airport in terms of movements, it’s not necessarily because of efficiency; it’s more a function of having just one runway. The airport has struggled with passenger satisfaction and ranked lower than expected in global airport rankings.

Sydney Airport, another jewel in GIP’s portfolio, saw massive losses during the pandemic, and its debt-to-EBITDA ratio was significantly higher than the industry average pre-pandemic. GIP’s airports have been heavily leveraged, raising concerns about financial stability and long-term sustainability. MAHB, on the other hand, has maintained a relatively conservative debt ratio and has shown resilience even in tough times like the COVID-19 pandemic.

MAHB’s successes: looking beyond the surface

Despite its challenges, MAHB has a lot going for it. The company has consistently performed well across various metrics, and KLIA, in particular, has been recognised in numerous global rankings:

• ACI’s Airport Service Quality (ASQ) Awards: KLIA has achieved perfect scores in the ASQ awards for airports serving over 40 million passengers per annum. It was named Best Airport by Size and Region in Asia Pacific in 2021.
• Global Customer Experience Awards: KLIA received four awards at the Global Customer Experience Summit 2023, including “Easiest Airport Journey” and “Cleanest Airport.”
• ACI Voice of the Customer Recognition: KLIA was recognized in 2020 and 2021, a testament to its focus on passenger satisfaction.
• Skytrax World Airport Awards: While KLIA has slipped in these rankings, it still performs well in specific categories. It ranked 9th in the Airports Council International’s (ACI) latest List of World’s Best Airports in the 40 to 50 million passengers category, surpassing airports like London Gatwick.

MAHB has also shown a strong commitment to improving its infrastructure and services. The company is currently in the process of upgrading KLIA’s aerotrain and baggage handling systems, with the new aerotrain expected to be operational by the end of 2024. MAHB is also enhancing digital services, including the MyAirport app with facial recognition technology for self-service check-ins.

A deal with consequences

The RM11 per share offer isn’t just a mystery—it’s a potential disaster waiting to unfold. If MAHB is sold at this undervalued price, the consequences could be far-reaching for the company, its shareholders, and the Malaysian economy as a whole. MAHB’s strategic importance to Malaysia cannot be overstated. As the operator of the country’s major airports, it plays a crucial role in the nation’s tourism, trade, and economic development.

Selling off such a valuable asset at a bargain price not only shortchanges the shareholders but also risks undermining the company’s ability to invest in future growth and maintain its competitive edge. Moreover, the lack of transparency surrounding the deal, particularly the roles and benefits for GIP and BlackRock, only adds to the suspicion that something isn’t quite right.

The mystery: who really wins?

At the end of the day, the proposed privatisation of MAHB at RM11 per share looks more like a backroom deal than a fair market transaction. GIP and BlackRock stand to gain an asset with immense potential at a steal, while the true value of MAHB is being grossly underestimated, leaving shareholders and the Malaysian public in the dark about the real motivations behind this deal.

As the deal moves forward, it’s crucial for stakeholders to ask the hard questions: Why is MAHB being sold off at such a low price? Who stands to gain the most from this deal? And perhaps most importantly, why now? The silence from those in charge is troubling, and it’s time they were held accountable. Malaysia cannot afford to lose one of its most valuable assets in what increasingly looks like a deal born out of incompetence or worse.

The bottom line is clear—this RM11 per share offer isn’t just undervalued; it’s a glaring oversight. MAHB is worth far more, and everyone involved knows it. If this deal goes through, it won’t just be shareholders who lose out; the entire nation will. And that’s something Malaysia cannot afford.