KLIA Aeropolis to take KLIA to the next level

With the development of another important driver in the Southern property market, the growth of the Southern corridor in the Klang Valley is happening at a fast pace.
KLIA Aeropolis to take KLIA to the next level
Badlisham: The government encourages us to also look at non-aeronautical activities. Photo by Patrick Goh

With the development of another important driver in the Southern property market, the growth of the Southern corridor in the Klang Valley is happening at a fast pace; and with the recent extension of KLIA area with all the “collateral” businesses developed around it; this will only generate further stimulus growth.

Quite commonly found in many parts of the world, when a Megapolis International Airport is  located in the outskirts, it has always lead to the development of Aeropolis (city within the airport).

Driving within the 10-15 minutes from KLIA today will bring you to a number of big development projects; nicely diversified and which are going to become the additional drivers for further growth.

KLIA Aeropolis to take KLIA to the next level


KUALA LUMPUR: With the construction of the RM4 billion klia2 out of the way, Malaysia Airports Holdings Bhd (MAHB) (fundamental: 0.5; valuation: 0.6) will now get down to focusing on “the bigger picture”, that is, developing the 6,750 acres (2,731ha) of land surrounding the KL International Airport (KLIA) in Sepang, said managing director Datuk Badlisham Ghazali.

“[Apart from running airports] the government encourages us to also look at non-aeronautical activities… KLIA Aeropolis will take KLIA to the next level,” he told reporters last week.

Badlisham noted that the airport operator is fortunate to have invested in the land surrounding KLIA early.

“There is the land given to us for development and we do not have to worry about buying land in the future. KLIA’s growth momentum is already there and we still have the capacity to grow further,” he said.

“We also have two national champions — Malaysia Airlines and AirAsia Bhd — to support our capacity. Finally, the decision to invest in klia2 and a third runway is godsend. This is important for aircraft movement,” he said.

With these investments, Badlisham said MAHB can now “really execute” and “support the vision” of KLIA Aeropolis.

To recap, KLIA and klia2 were developed as the centrepieces on the 100 sq km piece of land placed under its care for development of KLIA Aeropolis. Ancillary facilities such as aviation and technology parks; a regional cargo hub; and meetings, incentives, conventions, exhibitions (MICE) and leisure zones will eventually complete the development plan and sustain MAHB’s long term non-aeronautical revenue.

The first signs of MAHB’s investment success will be seen this year. The group will open Southeast Asia’s largest factory outlet shopping mall in May, in a joint venture with Mitsui Fudosan Co Ltd of Japan. The outlet will host 140 outlets on 25,000 sq m of land.

Badlisham said MAHB will also start the conversion of the former low-cost carrier terminal into a cargo handling complex. “We are looking at expanding the capacity and maybe introducing another player [to develop the cargo complex] for competitive reasons.”

On the aeronautical front, meanwhile, MAHB has a busy year lined up, with British Airways making a comeback to Kuala Lumpur in May after a 13-year hiatus, while German airline Lufthansa has recently increased its flight frequency out of KLIA to Frankfurt from five times a week to daily.

Further down the line, MAHB is exploring the upgrading of the airports in Kota Baru, Miri and Langkawi which are “already hitting their capacity”.

It may even add another airport to its stable of 39 as news flow suggests that the Kedah government is looking to build an international airport in Kulim.

“Of course, we would like to operate it. But it is ultimately a government decision… There are many considerations. It is not just about airport management, it is also about airspace management,” said Badlisham.

Besides its domestic success, MAHB will leverage its airport building and operating expertise overseas. Badlisham said this will open new doors to MAHB’s future growth.

“Now that we are finished with the construction of klia2 and sealed our position in Istanbul Sabiha Gokcen [in Turkey], we have got interest from European and Asian companies. They want to listen to our story and start talking to us about opportunities in the region,” he said.

The Public Accounts Committee (PAC) is one of MAHB’s fiercest critics. It tabled a report in Parliament in November last year highlighting the airport operator’s weaknesses and irregularities in the construction of klia2. They include the cost of construction ballooning to RM4 billion from RM2 billion and klia2’s opening delays, which MAHB attributed to unscheduled changes to its original specifications and the main contractors’ failure to deliver on their deadlines.

“klia2 was not just about the terminal. It is about how it relates to us building an aeropolis and what the country needs. We really believe that we need to be a contributor and driver of activities in Malaysia. This is how we do it,” said Badlisham.

“If klia2 was not built to today’s specifications… it could have met the present requirements, but it would not meet future requirements. That, would have [reduced] Malaysia’s future opportunities,” he added.

Badlisham also noted that klia2 was built based on the recommendation of the National Airport Master Plan 2008 instead of the original one made in 1992.

In addition, any alteration to klia2’s specifications was approved by the transport and finance ministries, which have representatives sitting on the MAHB’s board of directors, he said.

MAHB’s shares closed up 3.1% at RM7.32 last Friday, bringing a market capitalisation of RM10.08 billion.

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Financial Daily, on January 26, 2015.

Source : The Edge Markets

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