PETALING JAYA: Malaysia Airports Holdings Bhd
(MAHB) may be able to resurrect its earnings to pre-pandemic levels in early 2023 given stronger passenger traffic recovery and positive outlook for international air travel.
Apart from expectations of passenger traffic recovery, there is also a possibility of higher non-aeronautical revenue via new reset model and sustainable cost reductions. UOB Kay Hian Research said MAHB might be able to turn around its net losses in the third quarter of 2022 (3Q22).
It said MAHB’s earnings would likely recover close to 2019 levels, as early as 2023.
Furthermore, MAHB is currently trading at attractive valuations of 7.6 times 2023 enterprise value/earnings before interest tax depreciation and amortisation (EV/ebitda). It is well below its pre-pandemic five-year mean of 10 times EV/ebitda.
The research house liked MAHB for its attractive valuations and event catalysts such as formulation of new operating agreement (OA), development agreement and land lease agreement, as well as the reopening of China’s borders.
The new OA is expected to have more favourable terms such as adjustment of airports’ passenger service charge (PSC), which is well below the regional benchmark rate.
Based on its sensitivity analysis, a RM1 increase to MAHB’s current blended PSC of about RM45 will potentially increase 2% of its 2023 ebitda.
HLIB Research, meanwhile, said the market is expecting China to reopen its borders by year-end, which is a major boost for international air travel demand.
MAHB is a major beneficiary of the anticipated strong air travel recovery, coupled with gains from the lower cost structure and commercial reset programme implemented during the pandemic, according to the research house.
The upcoming implementation of the new OA will provide earnings and cash flow certainty for MAHB over the longer term, and MAHB will be able to commit to the long- term airport development capital expenditure plan with assured rate of return on investments, according to the research house.
Maybank Investment Bank Research said the 15th General Election (GE15) would have a long- term positive impact on passenger traffic and a short-term positive impact on airfares.
However, GE15 would likely favour Capital A Bhd more than MAHB.
It also has a positive view on the Malaysian aviation sector.
TA Research has raised its 2022 passenger movements assumptions by 28% to 50 million passengers, while maintaining the 2023 to 2024 assumptions at respective 90 million and 118 million, on account of demand boost from the GE15 and year-end festive seasons.
TA Research and UOB Kay Hian Research retained their “buy’’ calls with target price of RM7.36 and RM7.52 per share respectively.
