THE fact that Malaysia may abolish its five to 10 days of quarantine rule for international arrivals from March 1 coupled with regional countries re-opening their borders has been music to the ears of Malaysia Airports Holdings Bhd’s (MAHB) investors.
MAHB’s stock price has rallied 9.2% from RM5.73 on Monday (Feb 7) to close at RM6.26 yesterday (Feb 9) on news that the National Recovery Council (NRC) had recommended the Government to permit quarantine-free travel into Malaysia from March 1.
At the moment, vaccinated arrivals into Malaysia must be quarantined for five to seven days with the exception of Vaccinated Travel Lane (VTL) arrivals from Singapore while unvaccinated arrivals must quarantine for 10 days.
“If these quarantine requirements are lifted, we expect a steady boost to Malaysia’s international passenger traffic which in December 2021 stood at only 6% of the December 2019 base (in contrast to domestic travelers who already recovered to 58% of the pre-pandemic base),” opined analyst Raymond Yap in a company update.
“Also encouraging is the move by neighbouring countries to re-open their borders with Thailand resuming quarantine-free travel from Feb 1, the Philippines (from Feb 10) and Australia (from Feb 21).”
Moving forward, CGS-CIMB Research further expects Singapore to abandon the 50% limit on its VTL capacity in the coming months once the Omicron wave passes.
“Malaysia’s unilateral move to permit foreigners to enter the country is only meaningful if other countries also move to re-open their borders for quarantine-free entry,” stressed the research house.
“The eventual return of international travellers will have a highly beneficial impact on MAHB as international passengers pay five to seven times more in benchmark passenger service charges than domestic passengers and can also shop at duty-free outlets.”
Although the earnings leverage will be enormous, CGS-CIMB Research cautioned that the NRC is merely recommending the re-opening of Malaysia’s borders with the Government having the final say on whether to proceed to do so on March 1 or to delay the re-opening until the current Omicron-driven spike subsides.
“Moreover, we note that several large and populous regional neighbours (such as Indonesia, Vietnam, Japan, Hong Kong, China and India) continue to restrict arrivals,” observed the research house.
“A fuller and more robust recovery in MAHB’s international passenger traffic will depend on whether and when these countries liberalise their inbound restrictions.”
All-in-all, CGS-CIMB Research retained its “add” rating on MAHB with an unchanged DCF (discounted cash flow)-based target price of RM6.95 on the basis that the resumption of international travel will have a strong leveraged impact on MAHB’s earnings.
“Our passenger traffic forecasts for MAHB assume that its domestic passenger traffic in Malaysia will recover to 70% of 2019’s level in 2022F (from 18% in 2021) and its international passenger levels will rise to 25% of 2019’s level in 2022F (from 2.6% in 2021),” added the research house.
At 10.25am, MAHB was down 3 sen or 0.48% to RRM6.23 with 61,000 shares traded, thus valuing the company at RM10.34 bil. – Feb 10, 2022
