INVESTORS who dare to look beyond the COVID-19 pandemic may wish to take calculated risk to venture into selected investment themes premising on the roll-out of COVID-19 vaccines with the ultimate goal of achieving the herd immunity.
Aside from undervalued blue chips, growth stocks with good fundamentals and consumer stocks that will benefit from huge economic stimulus, one other potential is recovery plays in the travel and hospitality as well as property sectors.
In this regard, TA Securities Research viewed that the “recovery theme” remains largely intact given that four stocks under its radar, namely AirAsia Group Bhd, Malaysia Airports Holdings Bhd (MAHB), Genting Bhd and Genting Malaysia Bhd, have outperformed the market in 2021 despite poor results performance.
Below are some industry projection by the research house:
The recovery in earnings: Expect another lacklustre performance in 2021 where earnings recovery would tend to be rocky and slow, depending on local COVID-19 cases and state of movement control order (MCO) in the country.
As far as border reopening is concerned, this will likely be in end-2021 or early-2022 when Malaysia achieves the herd immunity against the pandemic.
Share price recovery: Earnings weakness in 2020 has not stopped share prices from recovering, indicating that the market has looked beyond the threat of the pandemic.
Year-to-date (YTD), travel and hospitality stocks have mostly outperformed the market. For stocks under its coverage, Genting, Genting Malaysia, AirAsia and MAHB have surged 12.9%, 10.4%, 2.8% and 1.4% YTD respectively, hence outperforming the FBM KLCI, which contracted by 1.2% YTD.
Second leg of the recovery: Against the backdrop of ample liquidity, low interest rate, and the unwavering support from the governments and reserve banks in the world to weather the difficult conditions, TA Securities Research believes that the situation is not too different from the 2007-2008 financial turmoil although the situation now is more pressing due to a virus that is not under control.
Nonetheless, with the all-time high stimulus and vaccination progress, it reckoned that the travel and hospitality stocks would have a second leg run-up in price like what happened in the past.
This can materialise in end-2021 or early-2022 when Malaysia achieves the herd immunity against the pandemic and is ready to open the border for mass travelling.
“All-in-all, we believe the price recovery is not over yet and look forward to a second leg of the price recovery in 4Q 2021-1Q 2022 when Malaysia achieves the herd immunity and borders have reopened for mass travelling,” projected the research house.
“Investors should not be distracted by the poor 2021 corporate earnings from travel and hospitality companies that management have forewarned and should stay invested this year.”
TA Securities Research has uphold its “buy” rating on AirAsia Group Bhd (target price: RM1.23); Malaysia Airports Holdings Bhd (target price: RM7.40); Genting Bhd (target price; RM5.92); and Genting Malaysia Bhd (target price: RM3.56). – April 23, 2021
