ENTERING 3Q 2021, the pandemic risk in Malaysia has waned as the new confirmed virus cases have dropped significantly since the peak at the end of August.
On October 10, 94.7% of the adult population have received their first dose while more than 90% of the adult population had both doses.
Thereupon, Prime Minister Datuk Seri Ismail Sabri Yaakob lifted the ban on interstate travel. Fully vaccinated people are allowed to cross states without an approval letter from Oct 11 onwards.
In a bid to recover from the lockdown losses, most local companies and businesses are already well-prepared to reap the economic benefits of interstate travel. Here are seven stocks that could benefit from the re-opening of interstate travel.
- AirAsia Group Bhd
AirAsia Group Bhd provides air transportation throughout Asia. The lifting of interstate travel ban beginning Oct 11 is expected to be a strong tailwind for the aviation sector. As all local tourism activities are permitted, a rising number of travellers and domestic flights can be anticipated going ahead.
To cater to the strong demand, AirAsia will reactivate up to about 30-45 aircrafts, aiming to recover its operation back to the pre-pandemic capacity of 39 local routes, 169 daily flights by end-November.
As a result, AirAsia sees brighter days ahead, able to recoup a large part of its pandemic losses in the upcoming quarter. From a long-term perspective, fully reopening international borders will be the upcoming focus point for investors to note.
- Genting Malaysia Bhd
The resort and casino company is a subsidiary of holdings company Genting Bhd. Undoubtedly, the tourism sector would be the biggest beneficiary of the removal of interstate travel. Since the outbreak of COVID-19 in 2020, the Malaysian Government implemented intermittent lockdown to curb the spread of the virus, causing almost all tourist attraction spots to close temporarily.
Malaysia’s well-known tourist attractions, including Resort World Genting (RWG) which belongs to Genting Malaysia was not spared from the fate of temporary operation closure, resulting in a slump in the top and bottom line of the group’s leisure and hospitality segment.
However, we expect to see a significant and obvious return of domestic tourist flow in Malaysia after the interstate ban is lifted. In the coming months, the group’s leisure and hospitality segment is expected to make a remarkable comeback after more than a year of revenue slump.
- Malaysia Airports Holdings Bhd (MAHB)
MAHB operates and manages airports primarily in Southeast Asia. Against the backdrop of removing interstate travel ban, MAHB expects to see brighter skies going forward as they can reactivate their domestic airline services.
This will eventually lead to an increase in traffic movements at its airports. With that, the company is likely to book a decent figure in their top and bottom line as the restarting of airline services would spur their revenue, mainly derived from the passenger service charges, aircraft landing and parking charges, and charges for using airport facilities.
Furthermore, with the recovery of traffic movement in its airports, duty-free outlets of Malaysia Airports are expected to experience a spike in visitor volume, leading to a revenue boost for this business segment from higher sales of non-dutiable goods.
- IGB Real Estate Investment Trust (IGB REIT)
IGB REIT owns and operates two major retail malls in Malaysia: Mid Valley Megamall and the Gardens Mall. IGB REIT has been negatively affected by the outbreak of COVID-19 as other retail REIT companies.
During the national movement control period, people avoided going to enclosed places, including shopping malls while non-essential retailers were ordered to shut down. This has led to lower revenue registered by the IGB REIT amid lower rental income and car park income.
Additionally, a lump sum of rebates granted to the tenants affected by the COVID-19 pandemic further weighed on the company’s performance. However, we expect customer traffic to the malls to recover quickly as soon as interstate travel is allowed.
Moreover, malls owned by IGB REIT like Mid Valley Megamall and Tropicana Gardens Mall would attract visitors in great numbers due to their superb tenant mix and prime location which is different and cannot be matched by online shopping.
- Petronas Dagangan Bhd
Petronas Dagangan offers a variety of petroleum products and services to retail and industrial customers. Since the outbreak of COVID-19, lower demand for oil and gas (O&G) to the lockdowns and travel restrictions has led to a decline in sales volume and reduced financial margins to Petronas Dagangan Berhad.
However, as the much-anticipated easing of interstate travel restrictions has finally arrived, Petronas Dagangan is expected to have a massive tailwind from the pent-up of demands for their petroleum products as well as the increase in the number of customers visiting their convenience store – Kedai Mesra.
In addition, the commercial business segment of the company will be able to capitalise on recovery of domestic air travel and book a higher revenue once the interstate travel restriction is removed.
- Pavilion Real Estate Investment Trust (Pavilion REIT)
Pavilion REIT owns and operates major retail malls and offices in Malaysia. With re-opening of state borders, we expect the number of patrons visiting malls to increase substantially as we believe that brick and mortar retail stores will remain relevant for consumers that want the physical shopping experience.
Hence, for those malls that survive from the pandemic, the rewards could be colossal as pent-up demand and widespread vaccinations spur a full-throated return to in-person shopping. As a result, mall vacancy rates may start to decline as more shops would be opened with an expectation of consumerism spike after more than a year of intermittent lockdown.
Hence, a real estate company that owns prime retail malls at strategic locations such as Pavillion REIT will potentially see a jump in revenue in the coming months.
- KLCC Property Holdings Bhd
KLCC Property is a real estate investment company engaged in the ownership, management, and re-development of office and retail space in Malaysia. Its property portfolio consists of office, retail and hotel.
With resumption of economic activity and the allowance of interstate travel, KLCC Property which is a heavyweight in the office and retail segment can be expected to be one of the significant beneficiaries. Revenue generated from its office segment was rather stable during the pandemic, mainly backed by the triple net lease agreements (TNL) and long-term leases.
Hence, we are unlikely to see a substantial and direct positive impact on their office segment after the government lifted the interstate travel ban. That said, KLCC’s second significant business segment – retail – is opined to see an obvious recovery from lifting of the interstate travel ban, driven by the encouraging visitors as well as improvements in consumer spending in their flagship mall such as KLCC Suria.
Besides, the top and bottom line of KLCC would also be boosted by recovery of their hotel business segment as removal of the interstate travel ban would spur local tourism activities which will improve hotel occupancy. – Nov 2, 2021
iFAST Capital Sdn Bhd provides a comprehensive range of services such as assisting in dealing, investment administration, research support, IT services and backroom functions to financial planners.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
