Good evening and welcome to all sides to today's conference. You are now participating in Malaysia Airports Holdings Berhad conference. For the duration of the conference, all lines will be in listen-only mode, and I'll be standing by for the question and answer session at the end of the presentation. I will now hand over the session to Encik Mohamed Rastam Shahrom, DCFO of Malaysia Airports Holdings Berhad. Thank you, and over to you, sir. Hello. Yes. Thank you again and, welcome to our annual session. Good evening. I'll go through the performance, a few slides of the performance, where I think I'll leave more time for any of the participants to ask us questions. In slide one, just get into it. Slide one, as you can see that, with the opening of the border, in quarter one, we can see significant momentum in terms of both Malaysia and Turkey. Malaysia pax actually, of course, compared to half a year last year, has tremendously grown from 3 million to 20.3 million. What's more interesting is that our international pax has, in half a year, actually recovered close to 20% of the total passenger pax to 4 million, because this is quite important. In terms of domestic, we are at 80%. Still long way to go, but we can see that things are moving in the right direction. For ISG, I think they are making fantastic strides. In fact, what's really delighted us is that, as compared to even pre-COVID, the first half international traffic for ISG was 6.4 million, and we have brought in 6.7 million, and that really helps ISG traffic mix as well as their revenue. In the revenue composition, we can see that ISG actually for international mix is at 49%, as compared to domestic at 51%, whereas Malaysia is international is still at 20% against 80%. The growth in traffic for first half 2021 for the group is 12 million, has actually almost grew by beyond 100% to 34.1. This actually translates to much better revenue traction. Half a year we have almost doubled our revenue from MYR 660 million to MYR 1.26 billion, and that is driven by both Malaysia as well as Turkey. Malaysia actually has grown from MYR 289 million to MYR 631 million, whereas Turkey actually has grown from 371 to MYR 630 million. That translates to very good EBITDA. The group actually has for Malaysia returned to a positive EBITDA. We have struggled for the past 13 months, and we can see that now Malaysia has EBITDA positive, whereas for Turkey itself we are already clocking close to EUR 439-440 million EBITDA for Turkey. That is marked improvement. As you can see, group EBITDA has almost reached half a billion for half the year compared to last year when we are actually at MYR 38.5 million loss. EBITDA has actually improved. I think the EBITDA improvement is twofold. Not only that, we actually have fantastic traction in terms of our passenger traffic, but the yield for passenger traffic in ISG has improved significantly because of the mix. The cost containment that we have continued to push forward has borne fruit. That's sustainable in terms of cost containment, has actually translated to a faster recovery in EBITDA, especially for Malaysia. Moving forward, in terms of our profit after tax, we can see that in quarter one, we made about MYR 104 million loss, and we have half that loss, almost half that loss to MYR 58 million in quarter two, bringing that half year loss to MYR 162.9 million. That gradual narrowing of losses, we can see it quarter by quarter. It does help that traffic actually has recovered. That pushed the narrowing of the losses in that sense. Moving forward, in terms of our borrowing, I believe that it, as compared to 31 December, has actually expanded a bit from MYR 5.3 billion to MYR 5.9 billion. That is because we front-load the fundraising of MYR 800 million in April, which is a blend of 3.86% in April, as opposed to the December fundraising that we did, which is actually at around 3.9% average. What we have done upfront, actually we beat the curve, because the interest rate actually went up. We read it correctly. We came into the market quick and we got that traction. What the benefit of it is that we are retiring a debt of MYR 1.5 billion of the highest cost of debt that we have, the highest sukuk paper that we have, which is actually the paper is actually 4.668%. We are replacing a 4.668% against a blended of 3.8%. We gain in terms of close to 80 basis points saving moving forward. In December, we believe that we will be able to repay the debt from our internal funds that we have raised much earlier. Cash and bank balances actually reflect not only in terms of the add-on cash that is continuing happening for ISG but also in terms of Malaysia. The cash surge is largely because of the MYR 800 million that we have raised also in April. That's in a nutshell. In terms of our undrawn lines, it's still quite significant at MYR 6.5 billion, where the Sukuk that we have we have undrawn about MYR 5.2 billion and RCF about MYR 1.3 billion. A good news that we wanted to share this quarter is really about our rating. We just got Moody's A3 outlook moved from negative to stable. I think that's a big win for us. We've been trying to make sure that Moody's does see in terms of our facts and figures moving forward from quarter to quarter. They believe that a revision upward sort of outlook is actually now rendered valid. They have made that recent announcement just about at five o'clock today, and that has to be reflected quite well in terms of our position. Moving forward, in terms of the outlook, I think Zaid actually will go through with you in terms of the Turkey side, and I will touch a bit in the Malaysian side. As you can see that the rebound in traffic actually translated to more capacity by the airline and the loading factor has been very encouraging. We'll share that also in the subsequent slide. International seat capacity is already nearing 64% by year-end. ISG continue to add on seat capacity as well as a very healthy loading factor. We'll run through with you on those slides later on. I think slide 5, I've actually gone through with you on that slide. I want to. I think it's better for me to skip that slide. Slide 6 shows quarter by quarter, half year by half year. What I do not touch yet is actually the other income. The other income is MYR 91.6 million-MYR 116.9 million. That is also showing a recovery trend because part of the other income is actually our reimbursement charge for utilities, which most of our tenants have already opened up their shutters and that actually helps in terms of adding up in terms of our other income. The other aspect of it is, we can see there is also an increase, slight increase in finance costs from MYR 315.7 to MYR 6.2. But this finance cost will automatically reduce once we pay off the one point five billion debt and that, we can see moving forward next year, finance cost will gradually come down with also ISG repayment of EUR 25 million by December. The repayment profile will be EUR 25 million in ISG in December as well as MYR 1.5 billion that we're gonna pay down for our Sukuk. That will actually unwind the borrowing. With that, we hope that the interest cost will reduce further in that sense. Moving forward in the cost avenue, I would just like to go deeper in terms of the cost because for the past two quarters, I think some of the analysts were asking me whether what's our plan to make sure the cost is sustainable in a sense when the passengers or the airport starts to open. Just to focus here, as you can see that, staff cost relatively, generally, actually went down to about 1.7% from MYR 275 million to MYR 271 million. Partly the reduction in staff cost is really the number of staff under the normal attrition. What we are doing now to make sure that we have an optimized manpower is that we are going through department by department in terms of our processes to make sure that we don't need to rehire again unless we really, really need to or it's compliance-driven. That's how we're gonna go about it to maintain our staff cost in a more gradual or stable manner rather than upsurge along with the tasks. The other part of it is that, I will touch on utilities later on, but maintenance also, that's where we are looking at, in terms of we manage to again, at a group basis, reduce our maintenance cost per se or keeping it kind of stable. I think that's quite important, especially, when we are actually replacing TTS and BHS. I think once we have done that, the replacement in 38 months for the TTS and BHS, I think that maintenance will come down significantly. It's quite hard to reduce that maintenance without changing what we have now because we have to make sure that those people mover are working well and making sure that our toilets are meet the required standards and so forth. There are rooms still once we complete our process review to see whether we can reduce on that part in terms of maintenance. As you can see, with our collection efforts, provision for write back on the provision for doubtful debt continues to actually give results. The write back is almost double for the half a year this year. But more interestingly is the utilities and communication, which appears to be going up from MYR 143.8 to MYR 161.5. If you look at the Part A of the table, you can see that that is driven partly from the external consumption. This translates to our other revenue line in other income. This is a cost, but we make some margins above that. It's good to actually have this cost because we would recover it in terms of a margin, in terms of revenue. If you take out that MYR 20 million variance, actually overall, even though with the increase of consumption, it will be actually a saving of MYR 3 million. How we achieve that saving is that the chill water reduction in terms of rate when we actually engage the joint venture on TNEC and as we converted GDC to a new joint venture. I think we announced that, and we can see that significant savings coming in just for six months, even with a significant amount of consumption climbing up from 132.9 kW to 149.7 kW. We can see that, there's a significant reduction in chilled water of MYR 34.1 million. That really helps us to contain our energy costs, although there is an increase in rates by Tenaga from 0.348 to 0.3476. That really actually drives our cost initiative. It is sustainable because you can see that ringgit to kilowatt per refrigeration cooling for the chilled water actually has a significant drop by half. To answer the analyst question earlier on, we were going through. What we do is we are going to address electricity energy consumption to an energy audit for us to see which equipment is actually draining more energy and see whether we can replace that. Because if we do that, there's a two-pronged benefit where we can reduce the amount of energy as well as reduce the amount of spares that we need to maintain this equipment. That's what we're gonna do this year, and we're going to push ahead apart from the process review that we're gonna do for all our work stream. When passenger pax does continue to improve and hopefully the mix will be much more international, we should hit a better EBITDA much quicker before we hit the passenger pax for 2019. That's always our mantra, that's always our objective, and that's always our push. We can see now in terms of our group core cost against first half of 2021 against 2022, there is slight increase, but that slight increase does not translate to when we translate into pax, it's actually half now in that sense. If you compare against pre-COVID first half 2019, you can see that we have shed group cost by over MYR 200 million. Even with such low number of pax, we are closing in to the MYR 40 per pax that we achieve in first half of 2019 to around MYR 21. What we intend to do is that even pax are much lower in terms of the recovery pace, but we will try to get the cost of pax equal to 2019. That's our objective. Moving forward in the next slide is the quarter-to-quarter review. I think the picture is rather similar. We can see that overall second half of quarter one and quarter two 2021 and quarter two 2022 there are slight increase in terms of group cost. Really, again, part of it is the utilities and the utility cost is partly because we are selling our utilities to the external tenants that we have. Moving forward, the next slide that we have is the results by Malaysia and Turkey. If you can see, excluding PPA adjustment, which is at the entity level, ISG is already at the entity level making profit of EUR 22.5 million. Before it's about EUR 26.5 million. With the amortization of the fair value at the group level, we still make a loss of EUR 50.8 million. We can see also a narrowing of the loss of Malaysia operation per se. The next slide shows actually our cash position. We are not burning cash as much as we used to. Now the only entity that's actually currently still burning cash, only about MYR 20 million a month is MI Sepang. All the other entities are actually generating cash. MI Sepang is burning cash because they need a bit, little bit more traction in terms of international pax, while we try to continue to reduce their costs. Hopefully when in next half, when our international pax move forward from 4 million to double of that, we should go in even keel in terms of not burning cash on a monthly basis anymore. You can see that the 165 is all the CapEx and utility payments that we have made at beginning of the year. We can see that towards the end in April there is a drawdown of MYR 818. Against that is MYR 3 billion of cash. Even if we take out that MYR 2 billion, then the net impact minus the distribution of perpetual dividends out of MYR 38.7. Of course, the amount of CapEx that we pay, the cash burn that the group faces for the second half is not that bad actually. We hope to turn it around to an add-on in terms of cash for the next six months. If you can see the undrawn facilities come from the revolving credit and untapped Sukuk program that we have and cash in hand now as a group, it's actually about MYR 3 billion as at 30 June 2022. Moving forward, I think this slide shows our rating. Last quarter it was A3 negative outlook. We have got a revision in Moody's. That's a significant change in terms of Moody's rating. There will be a rating review again with RAM. We are going through that process, and we don't foresee any significant change in terms of our AAA stable outlook rating. The ISG now, the loan now is about EUR 350 million, and we should be paying that another EUR 20 million by year-end to bring it down to EUR 330 million. We are now at ISG. As we speak now, the cash in ISG is about EUR 330 million. We are almost at net debt close to only EUR 10 million-EUR 20 million left. But the thing is that, as you are well aware, SSB has actually allow us to do a deferment for the concession for 2021 and 2022. We are still negotiating with them to attain a rebate on a force majeure during the pandemic. That is still work in progress. We hope we can close that out before the year-end. Moving forward, I think, with regards to the traffic outlook, we can see that the vaccination has actually really helped contain the virus and countries are all starts to open up and relaxing their requirement. That really does help a lot in terms of our recovery in traffic and the airline recovery process. Moving forward in slide 14 and conclusion, I think I hand it over to Zaid. He will be talking a lot about Malaysia in terms of the load factor is improved. Capacity for Malaysia has continued to improve, and that is supported by high load factor that drives the airline to put more supply that would actually eventually generate faster recovery in the sector. Over to you, Zeid, before we start our Q&A. Thank you so much, Encik Mohamed. I think when we look at slide 14 and update on what we shared the last quarter, we do see that trend in terms of international seat capacity actually increasing on a weekly basis. When you compare the border openings back on the first week of April, there was about just under 18% recovery versus 2019. In terms of seats, we're looking at close to 41% as of today. Mind you, these are seat capacity numbers for the whole of Malaysia, but we're happy to share as well when we look at the last 24 days in August, for example, on an average daily basis, we are also doing about 40% recovery of international passenger movement in Malaysia as well. It's a nice, like to like, if you can call it that, again to seat capacity recovery. We are looking at towards the end of the year, perhaps somewhere closer to 60%-70% recovery. But again, that's subject to many factors. As you can tell, over the last couple of weeks, we've seen relaxation in restrictions, notably for Malaysia. As of first August, what happened was that the Malaysian government has relaxed the requirements for passengers to use the travel pass within the MySejahtera app. Again, less red tape in terms of logging in your details when you enter Malaysia. We also see a series of indications that countries within North Asia, as Mohammad shared the slide earlier, slowly but gradually they are relaxing their requirements, beginning with, for example, Japan announcing that not only do they uplift the number of capped arrivals, but also the relaxation in terms of pre-departure testing. I think that was announced quite recently for September onward. You look at China as well, reducing the number of quarantine days from 14 to 7 days as well. I think just yesterday the Chinese government announced the relaxation for overseas or foreign students to come into China from yesterday onwards. All of this is an indication of where the seat capacity is heading towards as more and more countries start to further relax their restrictions. In terms of the load factor, which is just as interesting when we look at it, for the international side, we're looking at quite close to pre-pandemic numbers as of 30 July, in fact, around 70%. Again, this, while not as cyclical or seasonal like Turkey, as you'll see later, it's a good indication that we're recovering in terms of not just the seat capacity, but the load factors as well, as I mentioned earlier. The next slide, I think I'll just touch on a few key points. These are what our key airlines are actually sharing right now. For the local carriers, we've observed a lot of them are renewing their fleet. Some of them are reintroducing the planes faster. For example, AirAsia X has indicated a few days ago that they're trying to bring back up to 15 planes online by the first quarter next year, by having almost daily flights for most of the key destinations in the coming months as well. You see as well Batik Air taking new aircraft in terms of the 737-8, and introducing some of the key routes that they suspended over the last two years as well. A lot of them are international destinations. I think what's more notable to share is that with any airport, we're looking at connectivity. Malaysia Airlines, for instance, is expanding their code share arrangements with not just Qatar Airways, but Japan Airlines as well, to make KLIA a hub for these two carriers. Coincidentally, they're both Oneworld partners, so again, strengthens the position of KLIA as a Oneworld hub. Again, most of our traffic being KL-centric, I think that's not what we want. We also wanna focus on our other hubs, and that's when something you see with Firefly, for instance, where they're using Penang as a key hub as well. We're excited to see what MYAirline has to offer in the coming months as well. this is a snapshot of what the local carriers are doing aside from the international carriers. If I skip to Turkey straightaway, on page 17 you'll see a similar trajectory in terms of the seat capacity and load factor. I think a lot of you are aware that we're doing close to pre-pandemic levels, in terms of the number of international passengers. The split or the ratio itself, that's more important. I think Mohamed mentioned earlier, we're doing close to 50/50 split, and some days actually higher than domestic. As we enter this busy summer season, this is the most important point to share. I think, the yields will start to get a lot more better than what it was over the last couple of months, because the summer season is typically international-centric moving forward. Now, for ISG, it already has a dominant market share for domestic passenger movements. That's about a quarter of Turkey's whole domestic market is with ISG, where it serves 39 destinations. When it comes to international, just to add on to what I've shared earlier, I think they serve more than 110 destinations, especially during the summer period. We see at least 40 different airlines flying in and out of ISG. Predominantly low cost carriers, but I think that's important because we want to position ISG in terms of its attractiveness for people to travel to other parts of Turkey as well. We benefit in ISG as well in terms of the commercial spending. We've seen an increase in terms of spend per pax at our duty free operations managed by Dufry. For the first half 2022, I think the spend per pax was about EUR 8.50, peaking at about EUR 9.50 in the month of May itself. This is easily much more higher than 2019's average of EUR 7.50. The offering range by Dufry, I think, says a lot in terms of growing our commercial business itself. I think as we move on to the final slide on our key takeaways, before we move to Q&A, just as a refresher, we have seen encouraging recovery. I think we're cautiously optimistic for the second half of the year in terms of the rebound for Malaysia in particular. Turkey is doing very, very well and, you know, we'd like to see the international passenger movement spiking during the third quarter. Like I said, we can control what we can control, you know. With the recovery, it's anyone's guess. We are fixing our costs with a lot of the initiatives that Mohamed mentioned earlier, the transformation of workflows, the energy audit to minimize our utility outflows as well. I think you'll see a lot of this paying off more and more in the coming quarters when you look at the spend per pax, sorry, the cost per pax vis-à-vis 2019 trending downwards. Now, coupled with the refinancing of our borrowings in Malaysia and a lot of the lean asset base that we have after going through a lot of amortization and cleaning up of the assets in 2020 and 2021, I think we're positioning ourselves for not just above EBITDA but below EBITDA as well in terms of seeing where we can get the best outcome for revenue, costs, depreciation, interest, and also tax. With all the tax strategies we've implemented, I think we're trying to minimize our tax cash outflows so that we can preserve as much cash as not just contingency, but also in terms of our programs that we have lined up as well moving forward. The outlook when it comes to what the airlines are telling us and the market is very promising as well. We'll continue to track that as we always do. Yeah, I think Turkey has shown what one year's worth of good traffic can do for you. We hope within a couple of quarters we can show the same for Malaysia as well. I think we're more than happy to track these numbers for you diligently so that you can monitor us accordingly. Thank you so much. I think we can proceed with Q&A. Thank you, sir, for the presentation. Now a brief instruction for our teleconference participants. If you wish to ask question, please press star one button on your telephone keypad to put yourself in the question queue. To cancel your question, please press star two button. Your first question is from Mr. Deepak from HSBC. Please proceed. Hello? Hi. Good evening, and thank you for the presentation. Hello? Hello. Can you hear us? Yes. Very clear. Thank you very much for the presentation. My first question is about the utilization fee, which has been deferred for two years, 2021 and 2022, right? I mean, once we go past 2022, what is the trajectory of repayments? And what would be the normalized annual rate of repayment for the utilization fee? That is the first question. Then the second question is on Malaysian operations. We are inching closer towards, you know, breakeven at the bottom line. Now, in this context, again, cost is some of the biggest concern for investors. Yes, you have done a good job with the utilities part. With respect to the staff and others, how do you see it proceeding? Thank you for your question. I'll answer the first question. The concession of fee that we have to pay to SSB, yeah, you're correct. The EUR 115 million for two years, that's about EUR 230 million for 2021, 2022. Based on SSB letter, it is to be deferred indefinitely, so we can actually try to push it right up to the year end of the concession if you wanted to do, because there's no stipulated time period that they give us. That's not the idea. That's merely the interim. We are planning for as SSB is to attain a rebate of part of it or to actually extend the concession with the years that we are actually facing pandemic. Again, all these are appeals, and we keep on appealing. As you're well aware that the Prime Minister of Malaysia has gone to ISG and had an engagement with the President of Turkey and obviously, our agenda has been brought forward on that level. Recently, the king, Tuanku also has gone to ISG recently just, and I think Tengku Zafrul has also accompanied him. Again, the agenda is brought forward. We got a lot of backing from the government of Malaysia, also to engage the government of Turkey. It's not just MAHB, and I think that is our advantage as a GLC. The government of Malaysia is very supportive and the engagement is happening. I believe that they do have to take a little bit of time because there's a lot of money involved. We have our perspective, they have their perspective, but there are already positive signs and you can see that the deferment is not like we're gonna pay one lump sum next year. It's deferred indefinitely. The goal is always either we get a further extension to that or maybe part of it, they will give us rebate. I just like to remember that at one point in time, in two months, they have to close the entire airport, so we don't even have that. You know, there are a lot of avenues in terms of our angle to get some form of a rebate also as a combination of it. But we leave it to that. We have done what we need to do. Our leaders are there to engage their leaders. Let's see how it will pan out, yeah? The next question is regarding cost, Thank you for acknowledging the reduction in utilities. The question is, what are the cost elements in terms of manpower and in terms of plant and machineries, maintenance in that sense? For staff costs, I think, there's we utilize the normal attrition that we have year on year, and we try to keep the number of staff gradually getting lower through this normal attrition. What we try to contain is the incoming of staff into MAHB by reviewing the process flow, the workflow which we are doing now. We're doing a full blown across the group to identify how can we operate more efficiently or, and this allow us to redeploy our resources and to target where the areas are. Not only do we try to reduce the number of staff in terms of normal people going out through retirement, but where we redeploy, hopefully we can add value to the services of the airport. That's quite key. The other aspect of it is that we are not done yet for utilities. As I mentioned, we are doing an energy audit. We are looking at equipment, old equipment, because we got quite considerable amount of that so that we can see if we were to replace those equipment, we can save on the spares. We can also reduce the energy. As you are well aware that new technology actually generates usage of less energy. We are looking into that too. The third aspect of cost is, again, plant and maintenance costs. Maintenance costs translate to airport operations. Costs also translate to cleaning services. Those are the key big ones. As you are well aware, it's quite difficult to contain that because we do not want to lose the service level that we have. The minimum wage requirement by the Government of Malaysia does also impact our cost escalation on that part. On that basis, I think a more strategic approach is to review all the equipment in the airport so that maybe if we do a front-end investment, we will actually have a payback of maybe two to three years in terms of the cost that we could save. That's how we try to change the way how we do things. Those are the three items, the big three items that we are looking at in terms of containing our costs. I hope that answered your question. Thank you. Maybe if I could just clarify on the utilization fees, right? If I understand that, you're negotiating a rebate or an extension of concession in lieu of the payments of 2021 and 2022. Is this concession being sought for even the payments which were normally due, say, in 2023 and onwards to the end? Am I understanding it right, or is there some- Sorry, just to clarify, are you asking us whether in 2023 January will there be a deferment? Is that the question? No, you said that the annual run rate was MYR 115 million, right? Now 2022 and 2021 have been deferred. From 2023, would you be having to pay that MYR 115 million on a normal run rate? These two years have been deferred, that is understood. Oh, I see. For the rest of the concession period. All right. You are saying that are we gonna pay MYR 115 in 2023, and another MYR 115 that we have not paid in the same year? Is that what your question is? I'm saying since the annual payment is MYR 115 million, come 2023 will be normal run rate start to pay, you have to pay MYR 115 million each year, or you are negotiating even those payments for another delay? We are not negotiating those. Those are the concession agreement, contract. We have to follow that. Okay. In 2023, you'll end up paying MYR 115 for 23? Yes. Correct. Understood. Thank you so much. The negotiation is only contained in 2021 and 2022, yeah. 2023 and forward, we'll follow through the concession agreement what we have signed. The next question is from Mr. Raymond Yap from CGS-CIMB. Please proceed. Hi, good evening. Okay, I have one question on the commercial and rental for Malaysia. I think for the first half of the year, you booked in MYR 136.8 million for commercial and rental. If I deduct the first quarter of 74, I'm left with MYR 63 million in second quarter. I'm just wondering why the commercial revenues declined on a quarter-on-quarter basis from 74 to 63. Is that something, you know, that we should be aware of? Like, are you giving more discounts or are you know, waiving rentals or something like that? Okay. I think that's a good question. Yes, the answer is, we have to adjust because the issue is that the commercial tenants are also struggling because as you can see from Malaysia, we are only hitting 4 million international pax. Out of the 4 million international pax we have, if you dig even deeper, those are largely employee type of pax. They are not the high-spending pax. The high-spending pax are actually the Chinese spending pax. What happened is that for us to ensure their survivability and for them to open up their shutters, because we know that once they open up shutters, other revenue soon will trickle in. We did for the next six months and starting for the first second quarter a casual leasing where we tie a percentage of sales as part of our rental. Indirectly, yes, it would be somewhat of a rebate. We changed the rental mechanism to the end on some major tenants to be tied to their revenue, percentage of revenue. That's why you see that decline. Because if we go through an MGR route, it's just not viable for them to open businesses, and we do not want that. We have made a calculation in taking that steps. The priority for us is really to make sure our tenants survive and to make sure that our occupancy actually continue to hold and to strengthen. Occupancy actually in terms of KLIA now currently holds at about 67%. It has been declining from 75% to 67%. That translate to MA Sepang, which is KLIA at 76%, and KLIA2 is 59%, whereas the rest of the airport is like 65%. What we're trying to do is that to hold the turnover of the tenant and actually bring in tenants as quickly as we can to at least have a higher occupancy rate. Our target occupancy rate is actually close to 85%-88% by year-end. One of the initiatives for us to get that occupancy rate is to give sort of incentive for them to sign on. There's a lot of extension in terms of the rental extension in terms of the leasing. But they needed some breather for them to have some working capital for them to actually cleanse their inventories and so forth. Our aim for this year is that number 1, to stop the decline. Number 2, to get as best as many sign on so that we can get the occupancy up to 85%. As a trade-off, because of the low international pax and the international pax are not the Chinese type or high-spending pax, so we've got to do the casual leasing as a percentage of revenue in the same sense. I think moving next year, things will be much better, as long as we can get the occupancy up to 80-85% again. Next year, we can slowly transition back to the MGR. This year is all about getting the occupancy in. This year is all about trying to get the right brand to get the right tenant so that we get a good platform or a good base for our leasing. Yeah. Thank you. Okay. Thank you very much. That's all from me. Once again, if you wish to ask questions, please press star one button. The next question is from Mr. Ahmad from Nomura. Please proceed. Hi. Good morning. Sorry, good evening. Can you hear me? Yes. Clear. I just wanna check with regards to ISG, right? Probably you can check back with the traffic team. From how much of traffic has benefited from the change of transit hubs due to the closure of some airspace given the Russia-Ukraine conflict? I suspect there's been a sharp rise in traffic due to this. Would you think this is sustainable in the longer term when peace comes in? Hi, Ahmad. Thank you for the question. I think when we look at what's happened over the last couple of months, typically the traffic is mainly outbound. Outbound, i.e., out of Turkey. Predominantly locals traveling out, for the most part, except during the summer period, which is about now. When you look at the rise in international passengers over the last couple of months, what you can say is that, number one, it is mainly outbound movement, not so much inbound. Number two, we compare ourselves with being a transit hub. ISG is mainly a domestic-centric transit hub. We don't really take traffic out of other countries in Europe transiting at ISG and then moving on to other countries internationally as well. That's not ISG typical international passenger profile. Having said that, we would like to see stronger international passenger growth in the coming months, and then we'll analyze by country by country to share you more clarity, like, whether it's impacted positively because of Russia or not. For the last couple of months, we don't think that it's or was the case. That said, let's look at the summer period and then get back to you later. No, because my friend was just sharing her observation that a lot of flights has now shifted transiting into ISG rather than the traditional, like, KLIA, for instance. Yeah, possibly ISG will have benefited some from that. Yeah. It would be interesting to share more color later when you get more analysis. Thanks. That's all. Thank you, Ahmad. The next question is for Mr. Vince from Principal Asset Management. Please proceed. Hi. Good evening, everyone. Can we get some sense on the Turkey's operations in terms of whether have you all experienced in terms of costs the inflation situation there, has that gotten worse in recent times? Yeah, just a clear comment on that. Sorry. Not so clear. You're mentioning about ISG costs, is it? that's right. Okay. All right. I think, just now when we showed the slides on utilities, you can see that there is a sharp increase in the utility cost for ISG. I think the answer is yes. There is a significant impact because ISG has to endure a sharp increase in gas prices and that affects their energy consumption, especially the cooling energy. The answer is yes. In terms of inflationary costs in terms of the staff, because we pay the staff in lira, so that actually cushions the impact. Although we did three adjustments during the year just to actually repack our staff lira-based wages against the high inflation impact. Because of the appreciation of euro and our revenue is in euro, it cushioned the impact a bit. For fuel, that's where that goes hand in hand with the euro. That's why there is a sharp increase in the cost for the fuel. Apart from that, I think relatively, I think cost per passenger pax actually reduced for ISG, because we did manage to reduce other element costs that ISG has. The good thing about ISG is that, while the costs do increase, the revenue increase is sharper because, with the international pax moving closer to 50/50, we gain not only on the EUR 15 per pax throughput, but also the EUR 8.50 from duty free. We are looking at from EUR 3 for domestic against almost EUR 34 against a cost that we have to manage with this fuel. Yes, on expense alone, there is an impact in terms of utilities. That more than covers in terms of the yield, in terms of the international tax that we have. Thank you. Thanks for that. You are planning another round of revision for Is that question for Malaysia or is it for? Sorry, the line is quite bad on my side. Is it for ISG or is it for Malaysia? For ISG. For ISG, yes, we do. It depends on the inflationary effect of the Turkish lira, because we have to cap that, because we can't be making money out of people's despair. I think that's not right. Yeah. I think we have to recap that because the Turkish lira, if it continues to depreciate against euro, inflation really starts to creep up. We can't exploit our staff. I don't think we are that organization that exploits our employees in that sense. As I said, that will be a normal hedge against the euro appreciation against lira. Yeah. Okay. Great. Thank you. The next question again is from Mr. Deepak from HSBC. Please proceed. I had a follow-up on the traffic outlook. I mean, there's a lot of pent-up demand for sure, but how concerning is the economic situation and the rise in fuel prices for the traffic forecast or the traffic recovery trajectory? Okay. I think that's a fair question. I think for ISG the demand is there. I think what we can see is maybe a seat capacity around 35 million by year-end. That's what we are looking at. For Malaysia maybe it's around 50-55 million. Those are our gauge numbers. The question is that how does jet fuel increase impact the behavior of the airlines? I think it will because the airlines will be conservative in terms of selling more tickets, not knowing what will be the jet fuel movement is. I think that is always an inherent risk in terms of airline. The other part of it is that the load factor has been fantastic. As you can see, the airline ticket prices are actually very, very high. Even that, the load factor is there. I think that the traveling, the propensity to travel is always there. I think once, I think the airline is more comfortable, they will actually release more capacity. I think what they do not want to have is selling upfront tickets and the jet fuel starts to creep up. That's always the issue with the airlines, I suppose. Looking at the load factor and looking at the prices of the tickets they are loading, I think eventually, that will give them the confidence to put in more capacity into the market. I think the answer to it, yes, jet fuel does would impact slightly in terms of the airline's behavior. We believe that with the demand, the load factor that we have and we can see the trajectory of people traveling both for ISG and Malaysia, that would somewhat rather cushion the impact. The second question is that in terms of the economic growth, I think everybody knows that Europe, I think UK is already in a recession, not projecting. Europe is heading in that way, and US is in a recession. We don't see that in Southeast Asia. I think there are also growth paths for Southeast Asia. Malaysia of course charted a very good and robust growth path because we have a very low base. Still that seems to be a growth path. I think China does have that. The reason why the growth path for GDP is kind of muted in China because they are going for a pandemic zero policy. Eventually they will open up. I think for Southeast Asia, China, and Northern Asia will be less impacted in terms of as compared to Europe per se. ISG has already gone into this and this mode, and still they are growing. Somewhat rather the impact in Europe and the energy prices are being normalized in ISG and they are still going on a growth path. We don't see a sudden jerk or sudden adverse impact in both in ISG and Malaysia in terms of its recovery. If ever it will be slightly protected recovery path. We can see that the recovery trajectory is still there. Okay. If I may squeeze in one more question. Since you mentioned about the staff costs that you are letting the natural attrition happen and probably being very conservative on the rehiring plans, what we're seeing elsewhere globally, and particularly in Europe, is that there's heavy labor shortages. Traffic has come back very quickly, and there is labor shortages and airports are not able to cope up. I mean, what are you seeing in Turkey, and what are you seeing or what is your sense of what will happen in Malaysia, before you revisit this or if traffic has to reopen or, say, China has to reopen, then how prepared are you to handle that traffic? Or, put in other words, do you see any challenges in ramping up your employee base or capacity? I think that's when our decision what we made during the pandemic does count. We made a conscious decision. I think the analyst knows this because the analyst asked us about do we put people on retrenchment? Do we downsize? Do we put you know people in furlough? The answer during the pandemic was no, and we have never done that. That serves us well now because the thing is, as I reiterated way back in 2020 and 2021, there are other means to reduce costs. Without doing that, we reduced costs over MYR 750 million over the past two years, core costs. That has benefited us because we don't have to rehire, especially aviation security people, the compliance people or even people that man our shops. We don't have to do that, and there's no disruption like any other airports where they actually let go of people and now they are having difficulty in hiring people. The loyalty of our people is there. We managed to keep the skill, and we don't have to hire and retrain people because as you know, when it comes to regulation, aviation security, and all that, they have to pass through many exams and training courses. We don't have to reinvest in those costs. That's why one of the reason why our cost base is remain true to that is because we knew that in the long run it will benefited us, and we can see that now. There's no disruption in our airport. We don't foresee that even opening all you know full-blown in pre-COVID situation, we will not face that situation. As you can see that we are already preparing. We are ahead of the curve to prepare the flow to make sure that whether we can serve that. On the technology side also, if you come to our airport, we are deploying a lot of technology in terms of single token and drop off baggages. We are going to deploy that in a big way. That will help. We are actually refurbishing all our airport security system, the cameras and all that, so that we can position the camera in a much more effective way, so we can actually make sure that security is not compromised and that do help. On the other aspect, I think, if you say about operational disruption, the answer is no. Yes, there is discomfort to our passengers, I have to admit it. More and more, I've got SMSs from colleagues and friends complaining about our train. The Aerotrain is not functioning. Two trains are not functioning. One train is functioning. Sometimes both trains are not functioning and between the maintenance et cetera, we have to ferry people through buses. It's not that we are trying to create difficulty for passengers, not at all. The trains are old. We have already issued a PO and the train will be fully replaced within 38 months. The replacement is full-blown, not only signaling, not only in terms of control, but tracks and also some civil engineering to make sure that our customer will have a better experience. We're trying to compress that, but it's not easy. We're still working on it. People is already on the ground, working on it. Really there's no whatsoever possible disruption that we can see in terms of sorting labor. Yes, because our people mover, the train actually is old, so that could be a bit of discomforting. that does not restrict our ability to serve a surge in passenger. Yep. Thank you. Great. Thank you so much. Maybe I'll wait or if you allow me, I can ask one last question. Sure. About the CapEx, since you touched upon the trains and the baggage handling systems, right? What's the update on the discussions with the government on the Operating Agreement and the way forward from there? Just to answer your question on the CapEx, I think our CapEx outlook, we are going to spend around MYR 400 million next year. That's what we perceive, we are looking at. How we're gonna manage CapEx is, as you're well aware, for TTS, what we do is that within the 38 months, there's no real payment for that, and we got another 6 years on top of the 3 years during construction to the installment program. We do this because we wanted to match the recovery of traffic against the ability for us to generate enough cash for us to pay the CapEx. For the BHS also, we'll do similar to that. We try to actually match our outflow against the inflow. We try to push back as much as we can. Again, that also we have to actually watch very carefully the funding, that our vendor will do. That is work in progress for the BHS. For the TTS, we have completed that. There will not be any chunky payment coming in, abruptly within two or three years. That will reduce the liquidity risk. Your question into the operating agreement is, number one, the existing operating agreement is an agreement where the assets are the government, except for KLIA 2, we operate those assets, right? The new operating agreement, yes, there is an avenue if you were to develop an airport, but that is our choice. If it does not make sense, economic sense at all, we don't have to do it, and there is no mandatory requirement for us to do it. To achieve that in the new OA, we have terms to make sure that there is a recovery, capital recovery mechanism with the prescribed returns. That I can give you an assurance. In terms of the progress of it's progressing very well. We hope to get that wrapped up. As you can see, there is also already a first consultation paper by MAVCOM. Based on the MAVCOM consultation paper, they actually have a certain deadline whereby the year-end, they would finalize the rates, and that rate's going to be actually being executed in 2023. We'll obviously before they do that, we've got to get the current operating agreement signed, yeah? That's the first consultation paper, and we are supposed to revert back by next week Tuesday at five. Thank you. Thank you so much, sir. Thank you. The next question again is from Mr. Ahmad from Nomura. Please proceed. Hi, good evening. Sorry, I guess my question has been answered. I wanted to check on the timeline for the operating agreement of the MAVCOM consultation process. but that's been answered. Thank you. I'll jump back to the queue. The next question is from Mr. Peter Kong from CLSA. Please proceed. Thank you for the presentation. Following up on the question earlier on the next phase CapEx of MYR 400 million. I just want to understand, given your better credit rating, strong cash position on the balance sheet, whether or not this MYR 400 million is sort of like a flexible number, meaning to say that, you know, if by year-end, indeed, we know the PSC and aeronautical charges moving forward, you might reconsider, you know, your previous CapEx plans or that you last saw in 2019, right, in terms of the significant investments. Could you maybe comment on that and whether those plans would have significantly changed already? Sorry. Can you repeat your question? Because the line is not that clear. Sorry. The question. Yes. Because over here it's a bit blurred. It could be my fault. Okay. You mentioned the 400 for next year. Assuming we already wrapped up the aeronautical framework by end of this year, would this then give you more flexibility to spend on some of the major CapEx items that was earlier identified in the 2019 RAB exercise? No. I think we are going to be very disciplined on this. We got to be disciplined on this because during the pandemic, we burned significant amount of cash. I think you can see that. We gotta build this up. We gotta be very disciplined. For every CapEx that we spend would translate either in terms of cost savings, it's mandatory for us to provide a good customer service, which will reflect perhaps a revision on the tariff. Number three is it has to have a payback and return. We are going to be very careful, and we are going to stagger out the CapEx per se. Regardless whether there is a revision in tariff and so forth, we are going to be very disciplined in terms of CapEx. It's not gonna be Merry Christmas. Yes. If that happens. okay? Okay. Thank you for that. Right. Sure. Sure. Let's talk on that. Okay. Thank you. The next question is from Mr. Daniel from Hong Leong. Please proceed. Hi. Can you guys hear me? Yes. I have two questions here. Firstly, okay, on the status quo, to check on the status of the AirAsia X claims. What the court orders on this and also the provisions and any outstanding balance from these two airlines. Because I noticed that you have a write-back of MYR 12 million for first quarter and second quarter. Sorry. I have a write-back. Write-back. Yes. MYR 12 million in first quarter and second quarter. I'm just wondering, this write-back, is it related to all this, AirAsia X? No, it's not. It's relating to other receivables that we collected. We have not resolved yet the disputed amount with regards to AirAsia Berhad. We are now engaging in doing that recovery. If we did recover, it will not be MYR 24 million. It's going to be in the tune of MYR 40 million. It's not that yet. Based on the AirAsia Group or AirAsia and AirAsia X. The AirAsia X receivable is already under the creditors arrangement scheme. We have to abide by the court order. That obviously is already been in jeopardy. Now we are focusing on AirAsia Berhad. Okay. I see. Okay. Most of the amounts have been provided for. I see. Okay. Can I check what's the current FY financial views? Hi. Daniel. It's 34.4%. 10.4%. On the new operating agreement, just now you mentioned that it does not make economic sense, then it's not mandatory for Malaysia Airports to actually engage on the CapEx, is it? Yes, that's correct. Does it still click? Is it similar to the existing OA where if they are forced to do this CapEx or operational thingy, you will still get compensated under MAVCOM? I think it's somewhat similar but enhanced. Under the existing Operating Agreement, it does not address specifically if we were to do a development. It does not stipulate that. In the existing OA, it defined that BHS is not part of the CapEx. What we are trying to do in the new OA, we are trying to define that BHS, DTS is part of the development as long as we increase the capacity of those investment. That's what. That's the difference. It is similar, but it's enhanced to include what if we intend to do a development like klia2, so there is a capital recovery mode or capital recovery mechanism that we can actually recoup back our investment in the retail. Yeah. What you mean is that you can actually introduce all these CapEx that you think is required but may not be so-called approved by the government. Sorry, again? Can you repeat the question? What you are trying to say is that the improved OA is that you guys can include, you know, just all this BHS, DTS which will improve the operation, which you guys make sense. Yes. Correct. That is not included. We have proposed, yeah. It's not been tabled yet to the cabinet and signed. I think let's not jump the gun or maybe they will have second thoughts. Let us keep it within us. Until I'll tell when it's inked, then we will show you. Yes, that is the intention. I see. Can I check what is the current identified asset size that we are talking about now today? Because it's supposed to be a kind of RAB kind of thingy, still regular asset returns or something. Just wanna check. Can we refer back to the 2019 MAVCOM report? No. I think the issue is that if you read the MAVCOM consultation paper, it's- Yes. What they are doing is a three-year review, which is RP1, and that three-year is actually what they're proposing is an adjustment on the existing rate, on real terms, which we are actually also pushing forward for additional cost, which is above real terms. As you know, energy cost is beyond inflation and there are other costs involved, like working capital and all that, because we went through a pandemic. These are the discussions that we are putting forward to MAVCOM. It definitely can't be just on real terms. On the first three years, we cannot do an RAB because the denominator or the passenger traffic is very hard for us to predict. We are agreeable with MAVCOM because if not, the average cost of PAX will skyrocket. You know, that's not gonna be viable until we see much more visibility in terms of passenger pax because the issue is that if there's a risk also if we projected too aggressively and it doesn't come back, so the RAB will quite go against us. The three-year will be that. It will not be a cost-based approach, but the following RP2 then it could be a cost-based approach. At that point in time, we have to assess whether we can actually determine the projection of the passenger over the next three years. What I mean is that during the first three years, yes, you guys are not going to implement RAB, but then they will still need to determine what's the fair return to you guys, right? Based on the fair return, then they will do a benchmarking. If your actual numbers is below the fair return, then you'll get to recover the difference. Yes. Correct. What I'm saying, the fair return is also based on a percentage of the so-called WACC calculation or return, fair return to your asset size, isn't it? Yes, correct. With the What I want to know, what is the potential size are we looking at? I think what is the asset base that we are going to include? Yes. The point is it should be, but the mechanism is going to be refined after the consultation. It should be definitely, because at the end of the day that's our asset base. It's very clear that all these BHS and all will definitely be part of it, In our view. In our view. Can I just refer back to the 2019 as a reference? The 2019 MAVCOM report. Daniel, hi. Yes. You can refer to that as an indication of what the commission views an asset base should be. In fact, I think they make reference to the intangible asset. Yes. in a nation's books. Yes. Which today, as of the second or first half of the year, is what? MYR 8.2 billion. Yes. Before any major additions come in. Yep. I see. Okay. Understand. Other than that. Just to recap, just now you mentioned the CapEx for next year is roughly about MYR 400 million, next year, 2023. Yes. No cash flow. It also depends, 'cause last year I said it was about 350, but now the outflow is only half of it, right? Less than that, you know. It depends, what the situation are, because I think there are innovative ways how we can get those equipment by delivering the cash flow. That's what we are doing also. The indication that we look at it, we run our cash flow and all that, I think the affordability is about MYR 400 million without having significant liquidity stress on the company. I see. Okay. Now on your first half, you make about MYR 250 million loss. Okay. Roughly, yeah. Okay. On the PBT side. Third quarter and fourth quarter, are we looking at significant improvement where you guys are going to make a good profit already? I think looking at the traffic projection, looking at the loading factor, looking at the supply that's coming in, looking at how ISG is performing, looking at our international, I think, God willing, touch wood, we are. Hopefully, we'll narrow the loss. But getting it to breakeven, that's again a different question, whether the Chinese borders will be opening or not, yeah. I see. The key existential issue here is whether Chinese borders will be opening by end of the year. Yes, definitely. Okay, sure. That's all from me. Thank you. Okay. The next question again is from Mr. Raymond from CGS-CIMB. Please proceed. Hi, Raymond. The next question is from Mr. Ahmad from Nomura. Please proceed. Hi again, sorry. Just final question with regards to the MAVCOM and the Operating Agreement, right? It appears that, because both will run concurrently, with regards to finalizing the outcome. You think that it is really possible that the Operating Agreement will be finalized before year-end? That is our hope. I think it's long enough that we have waited. By the year-end, since I joined MAHB, it will be three years I'm working on it, so I'm hopeful. All right. Okay. Basically, sorry, what you hope for the MAVCOM to finalize on, which is more on the tariff for the RP One period, right? Whatever the operating agreement upholds is more towards the discussion for utilization fee, is it? Is it more towards that, or it's pretty much top-line, still pretty much governed by whatever the operating agreement will conclude? Okay. Let me try to explain this. There are two parts to it. The new operating agreement will actually define the terms of how much user fee that we have to pay the government. The negotiation is we want to cap it across three years. We don't want to change it. We don't want to increase it year on year because it's just too much for us. Yeah. Because now it's at 12.8% and it runs off, we have hit the cost that we got to get. We've been speaking to the government and say that it cannot be going on this way. That is in the operating agreement. That is not a discussion with MAVCOM. MAVCOM is purely on the tariff discussion. Okay. All right. Basically on the cost side of things, it's the discussion with the government and on the top-line side of things will be between MAVCOM, whatever MAVCOM decides on, basically. Yes, that is correct. Okay. What is the likelihood and possibility of the user fee or utilization fee to be revamped entirely? I mean, if you look at like what, Airports of Thailand is paying, it's only about 6-7% of the total revenue. Do you foresee it to potentially, instead of 12.8%, it could go lower? I think we have to also understand the balancing of it because the thing is that, I think the government has been spending on the airport like Kota Bharu. They have been spending MYR 400 million-MYR 500 million and it's not a lot of money. The issue is that, on top of that, the user fee is paid also to contra the MARCS. In 2019, I think they pay us close to MYR 180 million of MARCS. You see? We have to rebalance this. I'm not so sure whether in Thailand they have MARCS, but over here we do. We have to balance the government commitment in terms of the CapEx for some airports which is economically not viable, but it's good to have that because we have to serve the society in that. Of course the compensation if it's so decided to bring down the gazetted rate lower. I think in terms of bringing it to from 12.8% to 6%, I don't think so. What we are hoping is to flatten it so that it doesn't keep on increasing. Okay. I thought the purpose of MAVCOM, the looking into the rates is to create a balance where MAHB can proceed on with whatever CapEx they need and government will just put a step back and is that the overall outcome that MAVCOM intends to achieve or- I think for the RP1, that's not the case because what you're talking about, that one will be a full-blown RAB method of doing it. I think that's not the case. In this case, the tariff is very much in terms of adjusting, in terms of how to absorb the additional cost that we might incur pre-COVID or during COVID or post-COVID. Of course, to make sure that the MAHB is not dilutive in terms of its earnings. Yeah, but it's not an adjustment like to recover whatever investment in terms of building the airports and all that. I think that's quite you know. That's not the intention per se. Yes, in the MAVCOM consultation paper, we did propose certain other element of fees that we wanted to introduce and ask MAVCOM to look into it, so that, like for example, other airports in Southeast Asia, they have airport development funds and airport development fees and there are many other mechanism that we like any other airports we are proposing it. Okay. All right. Thank you so much. The next question is from Mr. Raymond Yap from CGS-CIMB. Please proceed. Hi, Raymond, we can't hear you. Okay. So rry about that. Okay. Yes. A Question about the Chinese borders. Assuming that it's not open at the end of the year and there's a prolonged closure into 2023, are there any other international segments that you think that can possibly make up for that shortfall? All right. Yes. Actually, Raymond, that is the pivotal discussion that we have bi-weekly with our senior management and our dear MD. I think we have thought about this because we are already assuming in month five that that's not gonna come in that sense. To fill or to equalize the gap, I think, Raymond, that's very difficult because the spending power of the Chinese is significant and the numbers are significant. What we're trying to do is to cushion it out. Our attention now is directing to the fourth biggest passenger spending that we have which is actually India. That's where we are gonna concentrate on. Of course, North Asia, which is Thailand and Japan. From our analysis also from Indonesia. These are the areas that we want to focus on. Middle East, we did look into it, but because this year is a World Cup year, so we have to weigh whether you know, money spent there could give. Again, this is an ecosystem, Raymond. Fortunately we got good relationship connections and bi-weekly we are also meeting the Ministry of Tourism and to ensure and to give the statistics to them. That statistic is quite important because apart from China, we see that the spending for commercial, retail and all that is from these countries, which is India, Indonesia, Japan and Korea. Actually the Middle East is quite good also. Because World Cup for the year, we have to be very careful on that. Really we are working towards that, Raymond, so that. To have a perfect gap, I wish we could do it. We ran the numbers, but it's just not possible, because the spending power and the numbers of the Chinese are way higher for us to just compensate one-on-one, Raymond. I think there is a fear that, even after they return, they may not spend as much anymore because, you know, of the problems that their economy is facing. Let's wait and see. Yeah. Thank you very much. Okay.