MALAYSIA Airports Holdings Bhd (MAHB) may continue to generate losses in the near future but the downside risk which culminated in its share price falling 20% last month is narrowing.
This positive development has prompted Maybank IB Research to upgrade its call on the airport operator to “hold” from “sell” previously but slashed its target price to RM4.30 from RM4.60 previously.
The research house expects MAHB’s FY2020 earnings to fall 40%/70% and its Turkish international/domestic passenger volume to decline 40%/60%.
“Turkish operations are recovering as we expected but the Malaysian operations, especially international traffic, continue to lag behind our forecasts,” wrote analyst Yin Shao Yang in a company update.
“With Malaysia’s borders remaining largely closed and some states returning to conditional movement control order, we doubt 4QFY2020 can make up for the shortfall.”
Moving forward, Maybank IB Research foresees three catalysts that can spur MAHB’s share price:
- COVID-19 vaccine: If a COVID-19 vaccine is found, global air travel ought to recover and able to boost passenger traffic at MAHB’s Malaysian and Turkish operations.
- Malaysia Airlines and AirAsia X Bhd emerging from debt restructuring: MAHB’s share price fall of circa 20% last month was largely due to the negative press surrounding the woes of Malaysia Airlines and AirAsiaX.
- New operating agreement (OA) with the Malaysian Government: MAHB stated that it is talks with the Government to restructure its OA by 4Q2020. On this note, it has proposed multiple new OAs (eg regulated asset base framework and airport development fund), all of which are more favourable than the current one.
“As such, if both airlines come to terms with their creditors and survive, they will eventually fly again and boost passenger traffic at MAHB’s Malaysian operations,” said Yin.
At 12.30pm, MAHB was down nine sen at RM4.21 with 509,300 shares traded, thus giving the company a market capitalisation of RM6.99 bil. – Oct 26, 2020
