Kenanga Research projected inbound tourist numbers to hit 27 million this year for Malaysia as compared to 20 million last year.
PETALING JAYA: Corporate exercises involving Malaysia Airports Holdings Bhd
(MAHB) and Capital A Bhd will upstage the recovery that is under way in the tourism sector, leading analysts to have a neutral view on the aviation sector.
Kenanga Research noted the proposed privatisation exercise of MAHB and Capital A’s regularisation plan to exit its PN17 status predominates the recovery within the tourism sector this year.
“For MAHB, the poser is if the proposed privatisation by a consortium at RM11 a share will be accepted by its minority shareholders.
“Meanwhile, while Capital A has been able to fill up seats in its planes, there is room to boost yields to ensure profitability after accounting for depreciation, aircraft leasing charges and finance cost,” the research house stated in an aviation sector report.
Kenanga Research projected inbound tourist numbers to hit 27 million this year for Malaysia as compared to 20 million last year, helped by the demand for leisure and business travel.
The visa-free entry for Indian and Chinese tourists is helping to raise the numbers, which inturn will benefit airport operator MAHB and low cost carrier Capital A.
“Also helping is China agreeing to extend its visa exemption facility for Malaysian citizens until the end of 2025, while Malaysia will extend the visa exemption for Chinese citizens until the end of 2026.
These should drive growth in MAHB’s passenger throughput and Capital A’s passenger demand in 2024,” the research house noted.
It projected MAHB’s passenger throughput to rise by 7% to 131 million this year, helped by resurgence in connectivity and airline capacity.
Kenanga Research added Capital A’s passenger throughput recovery is gaining traction, leading the carrier to re-activate its fleet to 202 aircraft by the end of this year (presently 187 aircraft) and for its operations and capacity to reach 83% of pre-Covid level.
The company is also expected to benefit from the current high yield environment, underpinned by the robust demand with forward bookings in February and March standing at 91% and 49%, respectively.
“It plans to launch more than 60 new routes across the group, expanding in China and India and start AirAsia Cambodia operations by mid-2024.
“While Capital A has been able to fill up seats in its planes, there is room to boost yields to ensure profitability after accounting for depreciation, aircraft leasing charges and finance cost,” the research house added.
Kenanga Research has a neutral view on the aviation sector but did not have any pick for the sector.
It noted the RM11 a share offer price tabled to MAHB’s minority shareholders by the consortium led by Khazanah Nasional Bhd, the Employees Provident Fund (EPF), New York-based Global Infrastructure Partners (GIP) and Abu Dhabi Investment Authority (ADIA) is reasonable, valuing it at 26 times and 20 times Kenanga Research’s financial year 2025 (FY25) earnings per share and FY25 consensus earnings per share forecasts for MAHB respectively.
Assuming a full acceptance by minority shareholders, Khazanah’s stake in MAHB will rise to 40% (from 33.2% now) while EPF’s to 30% (from 7.9%) with the balance 30% to be owned jointly by ADIA and GIP.
Capital A, meanwhile, is in the final stages of submitting its regularisation plan by the fourth quarter.
The company’s regularisation plan to lift it out of the PN17 status involves two major corporate exercises, namely the divesting of its aviation business to AirAsia X Bhd in exchange for shares and the proposed listing of a unit, which is the licensee of the AirAsia brand on Nasdaq via entering a letter of intent with Atherium Acquisition Corp, which is a special purpose acquisition company.
The research house has a target price of 76 sen a share on Capital A.
