San Miguel Corp’s bid to modernize Manila’s Ninoy Aquino International Airport (NAIA) offers both exciting opportunities and concerning financial implications, CreditSights, a Fitch Solutions company said on Monday.
“We expect NAIA to complement SMC’s greenfield international Bulacan Airport that is slated to be completed in 2027, thereby driving revenue and cost synergies,” CreditSights said in a report.
“Despite mild cannibalization concerns, we believe both airports serve the Metro Manila catchment area that faces heavy runway congestion amid growing travel demand and poor regional interconnectivity,” it added.
At present, only the NAIA and Clark International Airport serve the Metro Manila area with new greenfield airports. The Bulacan and Sangley airports are set to meaningfully ease the congestion only after they come online in 2027 and 2028, respectively.
“As such, we view the addition of NAIA as complimentary that could open more connecting routes, improve operational synergies and capture a larger air passenger traffic share at Manila for SMC,” CreditSights said.
According to the Fitch Group unit, the presence of Incheon International Airport Corp. as a project partner should also improve operational expertise and corporate governance.
The Department of Transportation (DOTr) last week issued a notice of award to SMC SAP Group the P171 billion contract to rehabilitate, operate and maintain the Ninoy Aquino International Airport (NAIA).
The SMC SAP Group, consisting of San Miguel Holdings Corp., RMM Asian Logistics, Inc., RLW Aviation Development, Inc. and Incheon International Airport Corp. won the NAIA rehab contract after offering the highest bid of 82.16 percent revenue share to the government.
CreditSights also said it was surprised by the huge revenue share of 82.16 percent that it projects to result in modestly negative annual EBITDA generation from the airport even post the expansion works.
“We are alarmed that the revenue share that SMCC bid for and is willing to pay to the government is much higher than the bids placed by its competing bidders – MIAC’s 25.91 percent and GMRAC’s 33.3 percent,” it added.
“We are also unclear about the background/capabilities of two of SMCC’s other partners, RMM Asian Logistics and RLW Aviation,” CreditSights said, adding they were unable to find publicly available information on the nature, shareholding, and financials of these companies.
“The potential corporate governance issues could result in increased debt/equity investor caution with the SMC name,” it added.
CreditSights projects continued aggressive capital expenditure appetite for SMC that it said could further strain its credit profile.
“We expect SMC’s capex to remain at or above P200 billion per annum over the next 2-3 years amid its ongoing airport, infrastructure and power capex, resulting in a persisting deep free cash burn,” it said.
