PETALING JAYA: With the collapse in air travel demand due to the coronavirus (Covid-19) pandemic, MALAYSIA AIRPORTS HOLDINGS BHD (MAHB) is expected to report a loss this year and marginally break even the next.
Maybank Investment Bank Research (Maybank IB) is not expecting a dividend payout this year, given the depressed air sector scenario. But the catalyst for any change in earnings expectations would be the lifting of the movement control order (MCO) and air travel demand picking up again.
Year-to-date, the stock has plunged alongside other airport stocks to RM4.37 a share from RM7.58, or 42%.
Maybank IB in a report said it has even revised its target price of the stock to RM4.45 a share based on this year’s earnings.
The research outfit said it has slashed its financial year estimates (FYE) for the 2020,2021 and 2022 group core net profit to RM592mil, RM527mil and RM551mil, respectively.
“As we forecast FY20E to generate a net loss of RM156.5mil (an earnings per share (EPS) of -9.4 sen) and FY21E to generate a minor profit of RM47.5mil (EPS of 2.9 sen), we have also slashed our dividend per share estimates to nil.
“To be fair, we have forecast free cash flow to remain positive throughout. Thus, we do not believe that MAHB runs the risk of being insolvent soon despite its challenging outlook, ’’ Maybank IB said.
MAHB manages 39 out of 42 airports in the country and also owns and manages the Istanbul Sabiha Gokcen airport in Turkey.
But MAHB is also targeting to rationalise around 20% of its Malaysian operating expenses in FY20E, amounting to about RM300mil.
“To err on the side of conservatism, we have forecast that MAHB will rationalise a lesser RM231.9mil.
“While depreciation and amortisation are non-cash in nature, we understand that this expense is actually variable, as MAHB depreciates its assets based on forecast passenger traffic.
“It follows that with fewer passengers, less depreciation will be recognised, going forward.’’
It has also revised its domestic and international passenger traffic growth forecast in view of the challenging times.
It has cut its FY20E/FY21E/FY22E Malaysian domestic and international passenger traffic growth forecasts to -40%/+20%/+5% for both from +0%/+5%/+5% for Malaysian domestic passenger traffic growth, and -10%/+10%/+5% for Malaysian international passenger traffic growth.
It added that it expects the FY21E Malaysian domestic and international passenger traffic to recover year-on-year due in part to the non-recurrence of the MCO (8%-9% of annual Malaysian total passenger traffic).
“We are also unsure if it will recover to FY19 levels, as we fear that Malaysian and foreign airlines may permanently cut seat capacity due to prolonged low air travel demand caused by the Covid-19 pandemic, ’’ Maybank IB added.
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