MIDF maintains 'sell' on MAHB as prospects remain dim despite resumed travel

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KUALA LUMPUR (Sept 14): MIDF Research has maintained its "sell" call on Malaysia Airports Holdings Bhd (MAHB) at RM5.13 as it does not anticipate a full recovery this year for the airport operator despite passengers resuming domestic travel.

On Friday MAHB said passenger traffic for the month of August fell 85% year-on-year to 1.43 million from 9.3 million previously, while year-to-date for the entire MAHB system including its Istanbul Sabiha Gokcen airport fell 65% to 32.7 million from 93.51 million.

According to MIDF, the July to August period is possibly the inflection point for MAHB on a monthly basis, with passenger and aircraft traffic expected to only improve in the coming months. However, from an overall perspective, it said, the current recovery does not yet imply the return to normalcy for air travel.

“We reiterate our previous stance where we opine that a full recovery scenario will not be feasible in the near term,” it said in a report today. MIDF maintains its target price on MAHB at RM4.52.

“We are expecting a tough year financially for MAHB in FY20 as the deep contraction in 2Q20 is unlikely to be offset by the gradual improvement in passengers’ traffic in the second half of FY20.

"Following that, we are maintaining our earnings estimates for year FY20-FY22 at core net losses to RM384 million, RM95 million, RM410 million respectively,” it said.

MIDF said its outlook on aviation hinges on the timeline of vaccine approval and the return of consumer confidence, adding that it is sceptical on the recovery timeline that implies a significant reduction in cases by end of FY20.

“To achieve such feat, consequential amount of resources and organization need to be in place as of now. Taking these into consideration, our thinking is trained on a more attainable timeline of 2H21 on the impactful administration of vaccines.

"This impacts our view on the recovery narrative for industry players such as MAHB. At this juncture, we believe impactful revenue rebound from air travels will be slanted post 2HFY21,” it said.

Surin Murugiah