Return of China tourists a boon to MAHB

PETALING JAYA: The reopening of China’s borders will enhance earnings for many Malaysian companies, including Malaysia Airports Holdings Bhd (MAHB).

UOB Kay Hian (UOBKH) Research, in a report, said MAHB is poised to benefit as the relaxation of travel controls and strong pent-up demand will boost Chinese patronage to Malaysia.

Additionally, it said the airport operator’s latest operating statistics indicated that it was on track to restore its earnings to pre-pandemic normalcy in 2023.

According to the research firm, Chinese travellers made up about 12% of Malaysia’s pre-pandemic tourist arrivals.

“According to, Malaysia is among the Top 10 destinations of mainland China travellers based on search volume.

“Other top destinations include Japan, South Korea, Thailand, Singapore, the United States, the United Kingdom, Australia, Hong Kong and Macau,” said the research firm.

For 2023, UOBKH forecast passenger traffic volume to return to 87% of pre-pandemic levels. This is on the assumption domestic and international traffic volumes recover to 91% and 84% of 2019 volume levels.

“While third quarter of 2022 (3Q22) passenger traffic volume recovered to 65% of pre-pandemic levels, we expect progressive service resumption of regional airlines into Malaysia from China after the border reopening continue to lift air travel activities and foreign visitorships.”

Meanwhile, UOBKH said Turkiye’s Istanbul Sabiha Gokcen Airport’s (ISG) impressive traffic recovery is also expected to fuel MAHB’s earnings growth this year.

It noted that ISG recorded 2.7 million international passenger movements in November 2022, reaching 92% of pre-pandemic levels.

This was presumably lifted by Europe’s pent-up travel demand and the weak lira.

UOBKH, which maintains a “buy” call on MAHB, said the stock is trading at “palatable valuations” and a rerating catalyst is the formulation of new operating agreements (OA).

“MAHB has received the authorities’ approval on the new OA’s principal terms and the finalisation is expected to be concluded by 1Q23.

“We expect the new OA to have more favourable terms such as adjustment of airports’ passenger service charge (PSC), which is well below the regional benchmark rate,” it added.

Based on UOBKH’s sensitivity analysis, a RM1 increase to MAHB’s current blended PSC of about RM45 will potentially lead to a 2% increase of its 2023 forecast earnings before interest, taxes, depreciation, and amortisation. Maybank Investment Bank (Maybank IB) Research said while it was positive on the reopening of China, it was negative on MAHB still having to pay ISG utilisation fees from the Covid years and the slower-than-expected return to service of its partner airlines’ aircraft.

“On Dec 28, 2022, MAHB received a discount on the utilisation fees that it was supposed to pay the Turkiye government for financial year 2021 (FY21) and FY22 amounting to €114.8mil (RM536.2mil) per annum due to the Covid-19 pandemic then.

“The balance is payable by end-FY25 subject to 6.5% interest per annum. We had expected the utilisation fees to be waived,” said the research firm.

The net impact of this, said UOBKH, was to cut its FY23 estimated core net profit by 36% and trim end-FY23 target price by 1% to RM7.31.

On a positive note, it said MAHB would likely resume paying dividends this year as it returns to profitability.

It raised MAHB’s FY24 core net profit estimate by 10% taking into account the arrival of more Chinese tourists.

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