KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research believes the worst is over for Malaysia Airports Holdings Bhd (MAHB) with borders generally reopening.
The bank-backed research house said the continued relaxation of travel restrictions and acceleration of vaccination measures in Malaysia has provided hope for a recovery in air travel demand in 2022.
The firm said the opening up of international borders under the vaccinated travel lane (VTL) and travel corridor arrangement (TCA) with other countries that are deemed safe with high vaccination rates will also provide hope for recovery.
“The Malaysia Aviation Commission (MAVCOM) forecasted passenger movement to reach 32.6-49.0 million, driven predominantly by domestic and ASEAN travel.
“MAHB is well prepared in restructuring its retail commercial offerings, which will encourage higher average spending as travel resumes in the financial year 2022 (FY22).
“However, we expect the recovery of ASEAN travel to only gradually pick up as some form of restrictions would still be in place at the initial stage,” it said.
Meanwhile, HLIB Research said Istanbul Sabiha Gokcen International Airport (ISGA) has also shown a strong passenger movement recovery since mid-2021, achieving 89.6 per cent in the third quarter (Q3) 2019 and 84.5 per cent in the fourth quarter (Q4) 2019 share of traffic.
Further, MAHB does not expect any material impact from the current Russia-Ukraine crisis as these countries only contribute circa 10 per cent of the airport’s traffic, which is predominantly domestic, Asian, Middle East and Western Europe.
“While we expect continued traffic improvement in Malaysia and ISGA, there is still the risk of loss-making given traffic recovery is mainly driven by lower margin domestic travel with Asean border reopening may still be at a nascent stage,” the firm said.
MAHB posted a loss in the Q4 FY21 at RM212.4 million, dragging FY21 to RM930.0 million, slightly above HLIB’s expectation (91.3 per cent) but below consensus (109.5 per cent).
The research house said MAHB reaffirmed its existing 50 per cent payout policy.
“Should MAHB turn around in FY22, management is exploring a potential share dividend re-investment scheme up to 10 per cent discount in order to conserve cash.
“We maintain a Hold recommendation on MAHB with an unchanged target price of RM6.00,” it added.
Source: New Straits Times
