MAHB, AirAsia to benefit from inbound regional tourism, says CIMB Research

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KUALA LUMPUR (June 20): CIMB IB Research maintained an "overweight" in the aviation sector which would also see Malaysia Airports Holdings Bhd (MAHB) and AirAsia Bhd benefitting from inbound regional tourism.

AirAsia is expected to be the primary beneficiary of stronger inbound tourism from the Asian region amidst the boom of short-haul tourist arrivals in Malaysia.

In a note to clients, it placed an "add" call on AirAsia with a higher target price of RM4.15, and an "add" call on MAHB with a higher target price of RM7.80.

It said AirAsia is expected to deliver strong financial year ending Dec 31, 2016 (FY16) results due to low oil prices, a soft competitive environment, rising tourist inflows from China and higher ticket yields.

AirAsia might also pay a special dividend if it sells its leasing arm, CIMB analyst Raymond Yap said in a note to client.

Meanwhile, Yap said CIMB expects to see tourist numbers pick up in the second half of 2016 although MAHB saw weak passenger traffic growth so far this year.

He said the key re-rating catalyst for MAHB is a rise in klia2's passenger service charge (PSC) tariffs.

Separately, Yap in quoting a recent article in the The Edge Weekly said although Chinese arrivals came mainly from the mid- to lower-yield category and do not spend on expensive hotels, they are precisely the sort of tourists who will use low-cost carrier services.

"As a result, we believe that AirAsia will be the primary beneficiary of stronger inbound tourism from the Asian region," he said.

The Edge Weekly highlighted the maintenance of tourism arrival target of 30.5 million this year, up 18.6% from 25.7 million in 2015, by Tourism Malaysia director-general Datuk Seri Mirza Mohammad Taiyab.
 
"A closer analysis of the 1Q16 tourist arrivals by nationality show clearly that short-haul arrivals are booming. Indonesian arrivals grew 8.2% yoy during 1Q16 while Chinese arrivals rose 35.2% and Thai arrivals rose 31.7%.

"The lacklustre overall tourist arrival numbers were caused mainly by MAS capacity cutbacks to Europe and Australia. Also, the lower volume of Japanese tourists does not affect AirAsia.

"These short-haul markets are some of the most important markets for AirAsia.

MAHB will also benefit from the boom in inbound regional tourists, although this is partially offset by the fall in medium- to longer-haul tourists.

"MAHB posted 3% traffic increase during five months of 2016, and we forecast full-year passenger traffic growth of 5.5%," Yap said.

At 10.40am, AirAsia dipped one sen or 0.39% to RM2.54 with 4.6 million shares done, valuing it at RM7.1 billion.

MAHB dropped 11 sen or 1.69% to RM6.40 with 13,100 shares transacted for a market capitalisation of RM10.6 billion.