23-11-2007: Muhibbah rides on Cambodia’s tourism boom

ALL of Muhibbah Engineering’s (RM3.48) divisions — construction, cranes, shipyards and the Cambodian airports — are enjoying strong double-digit growth rates and a favourable operating outlook, as we have noted in our previous update. Its success in clinching new contracts is testament to its reputation, competence and competitive advantage.

Today, we take a look at its Cambodian operations, which are enjoying robust growth as the country undergoes a major tourism boom. Growth will be further anchored by expansion plans in the Siem Reap airport and the opening of a third airport in Sihanoukville in mid-2008. We will take a closer look at its other divisions next week.

Robust growth at airports
Muhibbah’s Cambodian airport operations are held by 30%-owned Societe Concessionaire des Aeroports (SCA). The remaining 70% is held by French construction conglomerate Vinci.

SCA was awarded the concession for the international airport in Phnom Penh in 1995 and Siem Reap in 2001. Both concessions were originally scheduled to end in 2020, but have since been extended to 2040 following the award in 2006 of a third international airport, in Sihanoukville.

The airport operations are enjoying robust growth, reflecting the increasing popularity of Cambodia as a tourist attraction with new direct flights, low-cost flights, and the increasing popularity of the world-famous Angkor Wat temples, a Unesco World Heritage site.

For the first six months of 2007, international passenger arrivals at the two airports rose a hefty 36% year-on-year (y-o-y) from 1.25 million in 1H2006 to 1.69 million passengers in 1H2007. This was propelled by the Siem Reap airport, where international passenger arrivals surged 41% y-o-y from 640,000 to 902,000. Arrivals at the Phnom Penh airport rose 30% from 605,000 to 787,000.

International passenger arrivals rose 26% for the two Cambodian airports last year. Arrivals in 2006 totalled 2.683 million, compared with 2.121 million in 2005. In 2006, international passenger arrivals at the Siem Reap airport surged 31% to 1.36 million, while Phnom Penh airport arrivals rose 22% to 1.323 million.

The Siem Reap airport is shaping up to be among the world’s fastest growing airports — albeit from a low base. In 2006, its passenger arrival growth of 31% eclipsed that of global passenger growth of 4.9% and an average 9.7% growth for passenger arrivals at other Asian airports.

Airport expansion plans
To cope with rising passenger traffic, there are plans to expand the Siem Reap airport — whose new international terminal was opened just in August 2006. The terminal was built to handle up to two million passengers per year, but passenger arrivals are expected to top that level by next year.

Expansion plans will cost fairly little as the airport terminal is essentially arranged in resort-style single-storey modular structures centred around courtyards. Additional modular structures can be added to the existing ones at very low costs and without disrupting the existing structures or operations.

Meanwhile, the Sihanoukville International Airport, its third airport concession, is expected to open in mid-2008. The old terminal has been kept intact and renovated, while works are ongoing to expand the runway to cater for regional flights. As of mid-2007, US$16 million (RM54 million) has been invested in the airport.

Sihanoukville is Cambodia’s only deep-sea port and a major beach resort town. It houses many of Cambodia’s industries as well as an emerging oil and gas industry in the Gulf of Thailand. With enhanced air transportation links, Sihanoukville will be promoted as a major beach resort and industry base.