PETALING JAYA: Malaysia Airports Holdings Bhd (MAHB) is set to benefit from the reopening of international borders and recovery in air travel.
This is coupled with its lower cost structure and commercial reset programme that was implemented during the pandemic.
Rising jet fuel prices will also not be a concern for the airport operator, though it is a big factor for airlines, especially with the imposition of fuel surcharges.
Hong Leong Investment Bank Research (HLIB Research) said countries are opening up their borders while airlines are reinstating their seat capacities back to pre-pandemic levels.
However, CGS-CIMB Research believes that for international seat capacity to restore back to pre-pandemic leves, it will certainly take time.
This is because of the crewing and operational bottlenecks faced by the airlines.
Besides that, there is ample caution among travellers about the risks of overseas travel as the pandemic continues, as well as the continuing border restrictions imposed by the North-East Asian countries.
But HLIB Research is not overly concerned about the impact of high jet fuel costs at this juncture.
It believes the majority of air travellers, especially within Asia, are willing to pay for the fuel surcharges as they are eager to travel out after being in lockdown for the past two years.
This can be seen from continued improvement in MAHB’s statistics while airlines continue to experience high load factor and forward bookings.
“With the higher international travel mix, airport operators will benefit from higher airport passenger tariffs and margins,” the research house said.
Furthermore, international travellers command higher spending power at the airports.
Similarly, the majority of airlines have been reallocating their capacities into international segments, as international travellers are usually more willing and able to afford to pay for higher air ticket prices.
TA Securities, meanwhile, said it expects international passenger movements to drive growth, while domestic movements are expected to remain stagnant at two million to three million pax per month.
TA Securities has upgraded MAHB to “hold’’ from “sell.’’ It has maintained its target price (TP) at RM6.89 per share.
HLIB Research maintained its “buy’’ call on the stock with an unchanged TP of RM8.18 a share. CGS-CIMB, meanwhile, is reiterating its “hold’’ call on MAHB with a TP of RM6.76 as share.
CGS-CIMB cited upside risks for MAHB being improved terms for the new operating agreement with the government of Malaysia, as well as new airline entrants to the Malaysian aviation scene that could stimulate traffic.
If north Asia opens its borders convincingly, this may trigger a faster restoration of airline capacity or a surge in passenger travel demand that will lift load factors to the equivalent of 2019 levels.
However, the downside risks include the potential for China to keep its international borders shut into late-2022 or 2023, due to concerns over Covid-19.
Other downside risks include possibly slower-than-expected recovery of international travel in Malaysia due to insufficient airline seat capacity, high airfares and other impediments, such as the administrative hassle of renewing expired passports.
The research house also noted that airlines may slow down the pace of their capacity restoration if jet fuel prices remain high.