PETALING JAYA: The aviation sector, which has been hit hard by the pandemic, is anticipated to see a gradual recovery from the second half of this year.
Kenanga Research, in a report yesterday, said this could be attributed to the delayed reopening of the borders and inconsistent entry requirements for travellers. They would have an impact on tourism recovery in the short term, it said.
Airlines, including AirAsia Group Bhd, hotels and tourism activities are set to benefit from the resumption of air travel.
Kenanga Research and CGS-CIMB Research said Malaysia Airports Holdings Bhd (MAHB) would be a key beneficiary of the anticipated strong recovery.
The research houses said a potential re-rating of the MAHB is on the cards.
This is on expectations of the operating agreement (OA) being signed and a potential recovery play on renewed optimism for air travel.
Kenanga Research prefers MAHB for being the only airport operator in the country.
It anticipates a strong low base recovery for air travel with domestic demand recovering strongly to pre-pandemic levels.
CGS-CIMB Research said the improved terms for the new OA with the government and a new entrant to the Malaysian aviation scene could also stimulate the industry.
CGS-CIMB Research expects higher domestic travel due to the interstate connectivity to the country’s international airports.
As a result, it has raised its 2022 domestic traffic forecast by 21% (from 70% of the pre-pandemic base in 2019 to 85%), and raised its 2022 international traffic forecast by 60% (from 25% of the pre-pandemic base to 40%).
It added that AirAsia and the Malaysia Aviation Group had planned to restore 90% and 70% of their pre-Covid-19 passenger capacities by end-2022 respectively.
This would largely be international in nature, given that they had concentrated on domestic capacity restoration in the past six months.
“On the back of the easing travel restrictions, AirAsia’s leaner and optimised airline operations will help to spur its sales momentum through 2022,” Kenanga Research
The group has raised more than RM2.5bil through various fund-raising exercises in the last two years.
With the renewed optimism for air travel, Kenanga Research has raised its target price (TP) for AirAsia from 65 sen per share to 74 sen.
This is based on a higher price earnings ratio multiple from 14-times to 16-times, based on its financial year 2023 earnings per share.
For MAHB, its TP has been raised from RM7 to RM7.65 a share.
CGS-CIMB Research has reiterated its ‘‘add’’ recommendation on MAHB, with a higher discounted cash flow-based target price of RM7.60 a share from RM7.05 previously.
The strong recovery in Malaysian domestic traffic is very encouraging, while the passenger traffic at Turkey’s Istanbul Sabiha Gokcen International Airport has also picked up robustly, according to the research house.