KUALA LUMPUR (April 13): The recent selldown in Malaysia Airports Holdings Bhd (MAHB) shares presents a buying opportunity at attractive valuations, analysts said today, as they weighed the Covid-19 pandemic’s impact on the airport operator’s performance.

Kenanga Investment Bank Bhd analyst Raymond Choo Ping Koon wrote in a note today that year-to-date, MAHB’s share price is down 42% and Kenanga believes the recent selldown presents an opportunity to buy MAHB shares.

“We expect MAHB to be hit by Covid-19 in terms of passenger traffic growth due to travel restrictions and potential tariff rebates or discounts for its retail rentals. However, we understand that the group is undergoing a cost optimisation programme including energy conservation in its premises, closure of underutilised areas in the airport, postponement of advertising and promotional events,” Choo said.

AllianceDBS Research Sdn Bhd analysts Abdul Azim Muhthar and Siti Ruzanna Mohd Faruk wrote in a note today that in the research firm’s view, valuations are attractive for MAHB, which is majority-owned by the government. 

They said MAHB is Malaysia’s long-term airport concessionaire handling almost all flight movement in the country.

"The government’s extension of the [Movement] Control Order (MCO) to contain the Covid-19 outbreak will likely lead to historic lows for MAHB passenger movement in April. We expect the drop in passenger traffic and revenue, coupled with a relatively high fixed cost base, to trigger a net loss in FY20. While there may be continued share price volatility ahead of weak 1HFY20 results and potential exclusion from the KLCI, we believe MAHB’s share price has been oversold at 0.9x book and close to -2 standard deviation below its long-term price-book mean. We expect MAHB’s earnings to rebound in 2H20 and 2021, supported by the gradual normalisation of travel demand after Covid-19 eases,” they said.

AllianceDBS, which has cut its MAHB share target price to RM5.75 from RM10, has, however, maintained its “buy” call for the stock, according to the analysts.

Kenanga’s Choo said the research firm maintained its “outperform” rating for MAHB with a target price of RM5.70.

At 11:20am today, MAHB’s share price rose eight sen or 1.82% to RM4.48, for a market capitalisation of RM7.43 billion.

On Friday (April 10), MAHB said March 2020 passenger movements system-wide contracted by 59.4% to 4.8 million passengers from a year earlier while international and domestic sectors declined 68.9% and 50.8% respectively.

MAHB said overall passenger movements for its network of airports has been affected by Covid-19 and the travel restrictions imposed since March 2020. 

The group said airports in Malaysia registered decreasing passenger movements from the end of January 2020 and the rate of decline significantly increased from March 18, 2020, corresponding to the nation's MCO that restricted both Malaysians and foreigners from travelling to and from the country.

"Moving forward, the traffic recovery would depend on the speed and extent at which Covid-19 spread is brought under control at the domestic level as well internationally. While China seems to be recovering, the international flights to Malaysia would only resume if the contagion level in Malaysia is at a level that would encourage cross-border travel. Nevertheless, the prime initiator of air travel would be the level of control of Covid-19.

"With the aviation industry affected by the unprecedented travel restrictions and bans, MAHB has begun proactively executing group-wide optimisation plan to ensure that the group is able to meet its financial and operational obligations. This includes reviewing operational efficiencies, rebasing cost, prioritising capital expenditure and conserving cash to safeguard its financial resilience while ensuring business continuity under difficult conditions,” the airport operator said.

Malaysia’s MCO, which was initially scheduled between March 18 and 31, requires non-essential businesses to stop operations, while the public has been ordered to stay at home to curb the Covid-19 outbreak.

On March 25, Prime Minister Tan Sri Muhyiddin Yassin said the government decided to extend the MCO until April 14, because updates from the National Security Council and Health Ministry indicated an increase in Covid-19 cases.

On Friday (April 10), Muhyiddin said the government is extending the MCO until April 28.