PETALING JAYA: The aviation sector, which has been hit hard by the pandemic, is expected to see a gradual recovery from the second half of this year.
Kenanga Research, in a report released yesterday, said this could be attributed to the late reopening of borders and inconsistent entry requirements for travellers. They would impact the recovery of tourism in the short term, he said.
Airlines, including AirAsia Group Bhd, hotels and tourism businesses are expected to benefit from the resumption of air travel.
Kenanga Research and CGS-CIMB Research said that Malaysia Airports Holdings Bhd (MAHB) would be one of the main beneficiaries of the expected strong recovery.
The research houses said a potential reassessment of the MAHB is on the cards.
This is on expectations of the operating agreement (OA) being signed and a potential recovery play on renewed optimism for air travel.
Kenanga Research prefers MAHB to be the only airport operator in the country.
It predicts a strong basic recovery for air travel, with domestic demand returning strongly to pre-pandemic levels.
CGS-CIMB Research said the improved terms of the new OA with the government and a new entrant to the Malaysian aviation scene could also boost the industry.
CGS-CIMB Research expects an increase in domestic travel due to interstate connectivity with the country’s international airports.
As a result, it raised its 2022 domestic traffic forecast by 21% (from 70% of the pre-pandemic base in 2019 to 85%), and raised its 2022 international traffic forecast by 60% (from 25% of the pre-pandemic basis in 2019). pandemic basis at 40%).
He added that AirAsia and the Malaysia Aviation Group had planned to restore 90% and 70% of their pre-Covid-19 passenger capacity respectively by the end of 2022.
Much of it would be international in nature, given that they have been focused on restoring domestic capacity over the past six months.
“Following the easing of travel restrictions, AirAsia’s streamlined and optimized flight operations will help boost its business momentum through 2022,” Kenanga Research said.
The group has raised over RM2.5 billion through various fundraising exercises over the past two years.
With renewed optimism for air travel, Kenanga Research raised its target price (TP) for AirAsia from 65 sen per share to 74 sen.
This is based on a higher price-to-earnings ratio multiple of 14x to 16x, based on its earnings per share for fiscal year 2023.
For MAHB, its TP increased from RM7 to RM7.65 per share.
CGS-CIMB Research reiterated its “add” recommendation on MAHB, with a higher discounted cash flow based target price of RM7.60 per share from RM7.05 previously.
The strong recovery in Malaysian domestic traffic is very encouraging, while passenger traffic at Istanbul’s Sabiha Gokcen International Airport in Turkey has also recovered strongly, according to the research house.