Kenanga Research keeps 'overweight' call on aviation sector

Kenanga said AirAsia Group Bhd (pic) will benefit from the decrease in fuel cost which has fallen 30 per cent off its peak. —  Reuters pic
Kenanga said AirAsia Group Bhd (pic) will benefit from the decrease in fuel cost which has fallen 30 per cent off its peak. — Reuters pic

KUALA LUMPUR, Jan 3 — Kenanga Research has reiterated its “overweight” call on the aviation sector, given its positive future development.

In a note today, the research firm said it remained positive on the sector given the Transport Minister’s active involvement.

“We believe that aviation would be an exciting sector to follow in 2019 as we get more clarity on the government’s direction on the development of the sector.

“We are positive that the government will come up with an amicable solution for all the stakeholders, given our transport minister’s active participation in reshaping the sector,” it said.

For the near-to-medium term, Kenanga said AirAsia Group Bhd will benefit from the decrease in fuel cost as jet fuel has decreased by 30 per cent from its peak of US$99.10 (RM409.40) per barrel, coupled with more disposals of non-core investments where investors could benefit from potential special dividends.

AirAsia had recently announced the sale of 25 aircraft to United States’ private investment firm, Castlelake LP for US$768.0 million, the airline’s second aircraft deal after it sold 84 aircraft to BBAM Ltd Partnership.

Meanwhile, the research firm believed the potential implementation of the Regulated Asset Base (RAB) framework in 2019 could be a re-rating catalyst for Malaysia Airports Holdings Bhd’s (MAHB) stock as it will be able to raise the passenger service charges (PSC) based on capital expenditure requirement.

It opined that the escalating public spat between AirAsia and MAHB does not bode well for the future development of the sector as it creates unnecessary worries amongst the public and investors with regards to the PSC charges.

“We strongly believe that any differences and dispute between stakeholders should be handled professionally and through legal means.

“In our view, the equalisation of PSC charges is essential to promote a level playing field in the industry and is unlikely to impact inbound international traffic volume, given that Malaysia has one of the lowest PSC charges in the region for international flights, and most importantly, it bodes well with the government’s direction in promoting domestic tourism,” it added.

MAHB had served a writ of summons to AirAsia Group and AirAsia X Bhd for RM9.4 million and RM26.7 million in PSC charges that they had not and refused to collect from the passengers, arising from the equalisation of PSC charges in KLIA2 from RM50 to RM73 for international passengers.

As of midday, AirAsia Group's share on Bursa Malaysia eased two sen to RM2.94, while MAHB trimmed eight sen to RM8.25. — Bernama

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