AmInvest: Losses expected for MAHB in FY20 but recovery in sight

AmInvestment Bank Bhd is reactivating its coverage on Malaysia Airports Holdings Bhd (MAHB) with a buy recommendation with a target price of RM6.60 based on 22x revised FY22 EP. The counter closed at RM5.42 at 12 pm on Aug 14.

“This is at a 40% discount to the FY22 P/E of 36x of peer Airports of Thailand (AoT), to reflect Malaysia’s smaller tourism market vs. that of Thailand, coupled with a higher operating risk of MAHB’s Sabiha Gokcen International Airport (ISG) in Istanbul, Turkey.

The research house believed the air travel and tourism industries will gradually return to their growth path post pandemic and MAHB is a good proxy given its dominance in the airport segment locally and its significant market share in Turkey

It also favoured the airport operator given its strategic position in the economy as it warrants stronger support from various stakeholders that should help to tide it through the pandemic and the current downturn in the air travel market.

“We project MAHB to record a net loss of RM301 mil in FY20 but turn around with net profits of RM383 mil and RM498 mil in FY21–22 on the gradual recovery of the air travel and tourism industries as the Covid-19 pandemic subsides,” the research house said.

It expected MAHB’s passenger traffic to contract by 60% in FY20 which is higher compared with Malaysian Aviation Commission’s (Mavcom) forecast of 49–50% contraction.

AmInvest expected MAHB’s passenger traffic to rebound with a growth of 75% in FY21 and 35% in FY22. 

“The key risk to our assumptions is the actual timing of the reopening of international borders as international passengers historically made up ~50% of MAHB’s total traffic (implied in our assumptions is that international borders will gradually reopen from end-2020/early 2021).

“Already, the Malaysia-Singapore border is slated for reopening from Aug 17, 2020, subject to travellers completing substantial paperwork and complying with a long list of conditions,” the research house added.

It said MAHB’s passenger traffic has been on a recovery trend on a monthly basis, . From only 1% of the passenger traffic recorded the year before in April 2020 at the height of the

pandemic, MAHB’s July 2020 numbers improved to 20% of the year before. 

“We believe the passenger traffic could potentially recover to 50% of pre-Covid-19 level by the end of FY20, mainly driven by demand from domestic passengers (particularly between East and West Malaysia), as well as improvement from the international passengers traffic (as cross-border travel gradually resumes),” it added.

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