THE coronavirus (Covid-19) pandemic has delivered a beatdown of Malaysia Airports Holdings Bhd.
It has given the airport operator its first net loss in 12 quarters and got it booted out of the benchmark FBM KLCI’s top 30 constituents after it fell to the 40th position in terms of market capitalisation during the period of review.
Negativities from the pandemic had earlier led to MAHB’s share price bottoming at RM4.07 during the crash of March 19, the day that wiped out RM912.56mil from the group’s market cap.
The counter has, of course, rebounded from its lows. The renewed optimism in the stock market on the back of economies opening up and the easing of movement restrictions has spilled over into MAHB even when there is still fear when it comes to travelling.
On Tuesday, the day Singapore lifted its circuit breaker, MAHB’s share price jumped 14.2% or 72 sen to RM5.79 as investors are expecting a recovery moving into the second half of the year.
Could the worse really be over for the airport operator even when passenger movements have yet to pick up?
Save for the impact of Malaysia’s movement control order (MCO) for 14 days towards the end of the first quarter, passenger movements have started to decline since February as Covid-19 became more widespread, which forced tourists to postpone travelling plans.
Even China, where the bulk of tourists come from, was in a lockdown mode in a move to contain the virus from spreading.
This led to MAHB’s net loss of RM20.39mil for the first quarter ended March 31, its first quarterly loss since the fourth quarter of 2015 on the back of its revenue which came in 25.43% lower year-on-year (y-o-y) to RM933.84mil.
This was mainly due to lower revenue from airport services which declined 25.77% to RM559.89mil
Note that this is the impact of only a 27.6% contraction in passengers for the group’s Malaysia operations and a 12.3% reduction for its Turkey operations.
The major impact will only be seen in the group’s financial statement for the second quarter and some industry observers worry that the market has yet to price this in.
MAHB has guided that the number of passengers for its network of airports in April took a massive plunge of 98.8% to approximately 137,000 passengers, comprising 97,000 domestic passengers and 40,000 international passengers.
That is one month down. The months of May and June may only be slightly better even with the more lenient movement restrictions.
Even as Malaysia moved towards the conditional MCO phase, travel restrictions are still in place as only those with approvals from the police for urgent reasons were allowed to do so.
While airlines have started to operate, passenger movements are unlikely to see any improvement in the second quarter as the flights are mainly to key destinations domestically and airlines are only allowed to carry half the maximum number of passengers for every trip.
Kenanga Research, in its results note on MAHB, expects it to continue to be hit by the pandemic in terms of passenger traffic growth in Malaysia and Turkey.
It points out that while a prolonged pandemic would impact MAHB’s earnings, the experience from the severe acute respiratory syndrome outbreak suggests that passenger volumes will see a recovery once the pandemic subsides.
Back in 2003, MAHB only recorded losses in the last quarter ended Dec 31 at RM49.09mil, but the full-year results came in at a net profit of RM80.85mil. Passenger traffic actually grew that year, but at a low of 0.4%.
AllianceDBS Research expects another month of low passenger movement in May, although there could be a month-on-month (m-o-m) improvement.
UOBKayHian Research points out in a research note that while MAHB has guided for a 20% reduction in its operating expenditure, it may be insufficient to avert huge losses, which it expects to be in the tune of RM500mil this year.
It says MAHB is highly leveraged to international traffic and a weak recovery will result in a substantial decline in earnings and cash flow.
The research house adds that risk exists from a further impairment of receivables from both the airline and rental customers and the matters are further compounded by the uncertainty on the rate of recovery in international traffic, given that governments worldwide have not eased border control measures and quarantine requirements.
Currently, the group has a cash position of RM2.8bil as at the first quarter of the year. This has reduced from RM3.21bil as at end 2019.
UOBKayHian says MAHB is expected to be in a cash preservation mode until 2021.
“We expect it to omit dividend payment for 2020 and 1H21, ” it says, adding that it also assumes MAHB will reinstate its development capex in 2021 but at a lower rate of 25% to RM1.05bil.
And even under such a scenario, it says MAHB is expected to require additional RM1.2bil in funds.
Talks have been rife that the government is looking to arrange a RM1.5bil cash injection for three local airlines.
Would there be anything in store for MAHB to see through the turbulent period?
After all, the country’s sovereign wealth fund Khazanah Nasional Bhd and the Employees Provident Fund hold 33.21% and 14.37% respectively in the company.
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