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MAHB risks slower-than-expected recovery due to worsening pandemic — HLIB

KUALA LUMPUR (Oct 5): The recent spike in Covid-19 cases in Malaysia will dampen prospects of Malaysia Airports Holdings Bhd’s (MAHB) recovery in the financial year ending Dec 31, 2021 (FY21) as air travel demand is expected to stay sluggish amid precautions on movement, Hong Leong Investment Bank (HLIB) Research said in a research note.

The government’s move to implement the targeted enhanced movement control order (TEMCO) in hotspots, coupled with quarantine measures, has raised concerns over the safety and convenience of travelling, which will likely affect domestic air travel demand.

This is especially the case in Sabah and Kedah, said HLIB. Airports in the two states registered 10.1 million and 900,000 in domestic passenger movements respectively or a combined 21.2% of MAHB’s total domestic movements based on 2019 statistics.

As such, HLIB said it had cut its passenger movement assumption for FY20 to -68.1% from -47.9% previously, followed by 76.6% and 48.8% growth in FY21 and FY22 respectively.

The research house also expects a higher loss for FY20 at RM548.9 million, from a loss of RM386.6 million previously, and a loss of RM158 million for FY21 from a profit of RM279.2 million. It only expects a turnaround in FY22 at RM484.9 million.

“With the prolonged restrictions on international travel, MAHB runs the risk of continued loss-making unless a vaccine is found and rolled out to the mass public,” it said.

HLIB maintained its “sell” call for the stock with a lower target price (TP) of RM4.15 from RM4.35 previously.

“Due to the ongoing Covid-19 outbreak, MAHB is expected to remain in the red into FY21 with a depleting cash flow. Nevertheless, the management has secured enough liquidity until 2021-2022,” said HLIB.

The counter has fallen some 39% year-to-date. It was trading at RM4.62 at the time of writing today, giving it a market capitalisation of RM7.67 billion.

Source: TheEdgeMarkets