PETALING JAYA: Tourist arrivals in Malaysia are expected to jump four-fold to 9.6 million in 2023 from an estimated 2.5 million a year ago, thanks to the return of business and leisure air travel post Covid-19 pandemic.
Kenanga Research said in a report that the revocation of all on-arrival quarantine and testing requirements in Malaysia last August and the gradual reopening of China, which historically contributed to an estimated 12% of total tourist arrivals in Malaysia, will also help boost arrivals.
It told clients this should underpin growth in Malaysia Airports Holdings Bhd’s (MAHB) passenger throughput demand in 2023.
“We expect traffic trajectory to grow in the subsequent months as airlines continue to reactivate more aircraft to match increasing demand.
“Amplifying traffic growth trajectory is aircraft movements that are pointing towards increased medium and long-haul flights to Perth, Sydney and Auckland, South-East Asia and South Asia destinations,” it added.
It also pointed that the KL International Airport recently saw the return of Kuwait Airways after a seven-year hiatus, while two other foreign carriers namely, KLM Royal Dutch Airlines and All Nippon Airways, will resume non-stop flight operations to Amsterdam and Tokyo, respectively, after temporarily ceasing operations due to the pandemic.
“In addition, Malaysia Airlines increased its flight frequency to Tokyo from November 2022, in anticipation of the surge in travel demand following the reopening of Japan’s borders to international travellers.
“AirAsia Group, meanwhile is focusing on its medium-haul operations by increasing its Malaysia AirAsia X flights to 44 weekly across 10 routes.”
The research house has consequently raised its financial year 2023 (FY23) to FY24 passenger throughput assumptions.
“We narrow our FY22 net loss by 6%, raise our FY23 net profit by 3%, lift our target price by 15% to RM7 from RM6.10 but maintain our market perform call,” it said.
Kenanga Research pointed out that the Malaysian Aviation Commission’s recent proposal to cap airport tariffs, despite rising operating costs, will limit MAHB’s earnings upside.
Other likely risks for the airport operator include endemic and pandemic occurrences deterring air travel, unfavourable terms for airport operations, and the risks associated with its overseas operations.
“We like MAHB as it is the dominant airport operator in Malaysia and Turkey as well as being a good proxy to the recovery of air travel and tourism locally, regionally and globally, Kenanga Research said.”
It said the company also had strong shareholder, who have demonstrated “unwavering support through thick and thin” including during the pandemic and a massive cash call in 2014.“However, the recent proposal to keep airport tariffs status quo could work against its ability to generate enough cash flow for capital expenditure purposes, particularly for airport expansion and maintenance.”