KUALA LUMPUR, April 13 ― MIDF Research has maintained a “buy” rating for Malaysia Airports Holdings Bhd (MAHB) with a revised target price of RM5.13 per share from RM6.81 previously, after taking into account the effect of the revised annual passenger traffic forecast and lower retail revenue.
It said while the movement control order (MCO) would adversely impact international passenger traffic, MIDF believed that such sacrifice is of utmost importance in containing the Covid-19 pandemic.
“As such, we continue to reaffirm our view that the passenger traffic will see a nascent recovery in second half calendar year 2020 (2HCY20) provided that the Covid-19 pandemic subsides,” it said in a research note today.
The basis for the upside in 2HCY20 comes after airlines in China such as Air China filed domestic schedules for the week-long May holidays that offer the similar capacity to 2019 levels, a remarkable sign of planned domestic aviation recovery.
“The flight resumption patterns established in China may offer some guidance to the rest of the world, just as China’s strict containment measures have also provided cues to efforts elsewhere.
“Henceforth, we believe that Malaysia’s containment efforts will likely flatten the rate of infection, enabling MAHB's passenger traffic Malaysia to hit the 70.7 million mark in 2020 before recovering in 2021,” said the research firm.
For the first quarter financial year 2020 (1QFY20), MIDF believe that MAHB’s normalised profit will be in the range of RM50 million to RM70 million.
This would represent a yearly decline of at least -40.0 per cent.
It said the drag in earnings would mainly come from the -27.6 per cent year-on-year (yoy) decline in passenger traffic for MAHB’s Malaysian operations to 18.4 million in 1QCY20 due the impact from the Covid-19 pandemic.
Meanwhile, another research firm Kenanga Research which maintained “an outperform” call for MAHB, said while the prolonged coronavirus pandemic could impact MAHB's earnings, the experience from Severe Acute Respiratory Syndrome (SARS) suggested that passenger volume would see a recovery once the pandemic subsides.
Year to date, the stock is down 42 per cent.
“We believe the recent sell-down presents a buying opportunity. No changes to our financial year 2020 estimates(FY20E)/FY21E earnings forecasts.
“TP is RM5.70 based to reflect the derating of the market on the back of a bleaker economic outlook, both globally and for Malaysia,” said Kenanga in its research note.
Risks to its call include a prolonged Covid-19 disruption beyond the mid-year resulting in lower-than-expected passenger volume and the weaker-than-expected weighted average cost of capital (WACC) from the regulated asset base (RAB).
At 11.00am today, it share price gained 1.82 per cent or eight sen to RM4.48 with 354,900 shares traded. ― Bernama