Investors stay cautious on MAHB given new Covid strain

KUALA LUMPUR: Fears over the new strain of the Covid-19 virus could keep downward pressure on Malaysia Airports Holdings Bhd (MAHB) after the detection of Omicron in several global locations sent its share price falling in recent days.

TA Securities Research noted that information on Omicron remains limited and the World Health Organization has guided that it could take up to several weeks before it determines if Omicron is more transmissible or lethal than its predecessors.

"We believe the market is closely monitoring the situation now including the first Omicron case detected in SEA countries and the first Omicron death case, and if SEA governments will make a U-turn on VTL or other travel bubble initiatives," said the research firm in a report.

MAHB's share price dropped 53 sen or 8.37% to RM5.80 over the last two trading days following the indentification of Omicron in countries in Europe and Australia.

Low-budget airline group AirAsia was also seen retreating in the wake of the Covid development. The stock shed 9.5 sen or nearly 10% to 87 sen a share during the same period.

While the market is pricing in another lockdown in the event of an Omicron breakout, TA Securities reiterated its "buy" call on MAHB with an unchanged free cash flow to equity valuation of RM7.49.

It said it was keeping its valuation given that there are no Omicron cases found in Southeast Asian countries at this juncture.

"We will revisit our call when the SEA governments are returning to closing their borders again," it added.

In other updates, MAHB has indicated that Cukai Makmur will not have any earnings implications on the group. However, the group will benefit from double tax deduction for any rental rebate given to its tenants.

In its recently announced third quarter financial results, MAHB registered a core loss of RM184.7mil, which boosted year-to-date losses to RM666.5mil against TA Securities' FY21 projection of RM743.9mil and consensus estimate of RM913.9mil loss.

The research firm considers this to be within expectations as 4Q21 loss is expected to moderate following the upliftment of interstate travel bans and the implementation of vaccinated travel lanes.

MAHB is also hopeful that Istanbul Sabiha Gokcen International Airport will report lower losses in the final quarter of the year with better passenger mix to offset the rise in operating costs.

According to MAHB, the depreciation of the Turikish Lira has caused inflationary pressure that sent utility cost and other expenses higher.
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