KUALA LUMPUR, Oct 1 — Kenanga Research expects air travel to recover at a gradual pace, starting from the first quarter of 2022 (Q1 2022), as the availability of vaccines has renewed optimism for air travel returning to normal sooner than expected.
Nevertheless, the research house noted that airlines, including AirAsia, are projected to continue facing tougher operating conditions pending the widespread availability of vaccines, as there could be sporadic resurgence of Covid-19 infections.
It said that the aviation sector’s performance in the first half of financial year 2021 (1H21) was mixed, with AirAsia’s results coming within its expectations, while Malaysia Airports Holdings Bhd’s (MAHB) had come in below its expectations.
“MAHB’s 1H21 revenue fell by 45 per cent in tandem with lower aeronautical (-46 per cent) and non-aeronautical (-52 per cent) segments.
“Passenger traffic for the Malaysia operation contracted by 84 per cent due to lower international (-94 per cent) and domestic (-76 per cent) passengers,” it said.
However, Kenanga Research noted that MAHB’s Turkey operation showed signs towards normalisation as passenger traffic rose 17 per cent to nine million passengers.
MAHB’s 1H21 losses widened to RM447 million from RM111 million in 1H20 due to higher losses in the Malaysian operation, although its core operating cost contracted by RM99.5 million, in line with the group’s commitment to further reduce costs, it said.
Similarly, AirAsia’s 1H21 losses narrowed due to the absence of fuel hedge swap losses.
“The share price of Malaysia Airports Holdings Bhd (MAHB) has risen by 20 per cent year-to-date, coming close to our target price (TP), but offering limited upside.
“As such, we downgrade MAHB from ‘outperform’ to ‘market perform’ with a target price (TP) of RM7,” it said.
However, it noted that in 2019, the group had announced that the government had approved the extension of MAHB’s concession to operate 39 airports in Malaysia from 2034 to 2069.
“The yet-to-be signed operating agreement (OA) could be a re-rating impetus for MAHB,” said Kenanga Research.
As for AirAsia, the research house had maintained its ‘underperform’ call on the group’s shares, with TP at 70 sen, noting that the group is in need to raise working capital due to losses following the decline in passenger loads and cash flows challenges. — Bernama