Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 1, 2021 - March 7, 2021

COVID-19 has undoubtedly hit the tourism and travel industries the hardest. Be they hotels, airlines, airport operators, theme park and leisure activity operators or travel agents, there was no way to avoid the dire impact of the novel coronavirus.

With the country now well into the second Movement Control Order (MCO 2.0) period, the impact on tourism players has not been as severe as the first MCO, partly because restrictions — which began in mid-January — have been implemented on a targeted basis this time around.

Tourism stocks are slowly recovering from last year’s beating.

TA Investment Management chief investment officer Choo Swee Kee tells The Edge that tourism and tourism-related sectors should see a sharp recovery in business as soon as the pandemic is under control. “This is expected to happen by this year in conjunction with the rollout of the vaccine programme in the country. Airport operators such as Malaysia Airports Holdings Bhd (MAHB) and airlines such as AirAsia Group Bhd are the obvious beneficiaries of the return of domestic and foreign tourists.

“Corporates offering leisure and entertainment packages or services, such as Genting Malaysia Bhd, should also see a significant recovery or normalisation of business.”

Airport operators and airlines

For the financial year ended Dec 31, 2020 (FY2020), MAHB reported a net loss of RM1.1 billion compared with a net profit of RM537 million in FY2019. Revenue plunged 64% year on year to RM1.87 billion, in tandem with a 69.5% contraction in passenger movement as a result of Covid-19.

RHB Research says in a Feb 16 note that it expects MAHB’s passenger volume to improve gradually over the next 12 months, given that the National Covid-19 Immunisation Plan has already kicked off. The research house upgraded its call on MAHB to “buy”, with a target price of RM6.65.

The stock closed at RM6.02 last Wednesday, which translates into a market capitalisation of RM9.9 billion. Year to date, MAHB shares have appreciated just 2%.

Meanwhile, Hong Kong businessman and top poker player Stanley Choi Chiu Fai emerged as a substantial shareholder of AirAsia on Feb 18 after acquiring 332.5 million shares or an 8.96% stake in the airline. His emergence gave the counter a 16.6% boost to 95 sen last Tuesday.

AirAsia shares closed at 90.5 sen on Feb 24, valuing the airline at RM3.3 billion. Year to date, the stock has inched up 2%.

According to a Reuters report, AirAsia has postponed the announcement of its 4Q earnings to end-March from Feb 25.

Hotel and leisure operators

For its financial year ended Dec 31, 2020 (FY2020), Genting Malaysia Bhd recorded a net loss of RM2.26 billion against a net profit of RM1.4 billion a year ago. Revenue fell 56% to RM4.53 billion, mainly due to the temporary closure of the group’s Malaysian operations since March 18 last year. Although operations resumed in June, it was at a reduced capacity.

Covid-19 exacted a heavy toll on the group as it took a hefty impairment loss of RM590.7 million in FY2020 — RM222.3 million related to the assets of Resorts World Birmingham, RM208 million related to casino licences and assets in the UK, and an impairment loss of RM144.1 million related to the assets of Resorts World Bimini.

Despite swinging into losses, the group declared a total dividend of 14.5 sen, comprising an interim dividend of 6 sen per share and a special dividend of 8.5 sen per share.

In a Feb 26 note, Maybank IB Research upgraded its call on the stock to “buy”, with a target price of RM3.17. “The first half of 2021 will likely be difficult due to travel restrictions but the second half should be better, thanks to Genting SkyWorlds (its new outdoor theme park that is scheduled to open in 2Q2021). Rolling forward our valuation base year to end-FY2021 from end-FY2020, we raise our sum of parts-based target price to RM3.17 from RM2.60. Another potential catalyst is Genting Malaysia writing back its Mashpee Wampanoag investments,” it says.

Avillion Bhd, which operates the Avillion brand of hotels in Malaysia, reported a wider net loss of RM11.62 million for the nine months ended Dec 31, 2020 (9MFY2020), from a loss of RM9.06 million a year ago, on the back of a 68% decrease in revenue to RM17.1 million. However, its share price has recovered 23% year to date to close at eight sen last Wednesday, giving the company a market capitalisation of RM75 million.

Landmarks Bhd, which operates the Andaman luxury resort in Langkawi, also saw its share price appreciate 10% year to date to 37.5 sen last Tuesday, valuing the company at RM218 million.

The share price of food and beverage and leisure operator Only World Group Holdings Bhd, which operates “The Top” at Komtar Tower in Penang, has inched up 3% year to date to 36 sen, translating into a market capitalisation of RM143.7 million.

 

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