Kenanga believes the future development of the sector would be positive with a more active involvement from Loke
By SHAZNI ONG / Pic By MUHD AMIN NAHARUL
The country’s aviation sector would witness exciting events this year as the government provides greater clarity on the industry which is worth billions.
Kenanga Research said the future development of the sector would be positive with a more active involvement from Transport Minister Anthony Loke, including resolving disputes among the stakeholders. The research house has the sector as ‘Overweight’.
“We are positive that the government would come up an amicable solution for all the stakeholders given our transport minister’s active participation in reshaping the sector,” said analyst Adrian Ng of the research house.
The research house also believes it would be “business as usual” for both AirAsia Group Bhd and Malaysia Airports Holdings Bhd (MAHB).
“We expect their finanical year 2018 performances to be in line with our estimates,” it said.
For the near-to-medium term, Kenanga Research said AirAsia will benefit from the decrease in fuel cost whereby jet fuel is down by 30% from its peak of US$99.10 (RM410.48) per barrel.
“This is coupled with more disposals of non-core investments on the cards, of which investors could benefit from potential special dividends,” it said.
AirAsia recently announced the sale of 25 aircraft to US private investment firm, Castlelake LP, for US$768 million, which is the second aircraft deal after the disposal of 84 aircraft to BBAM Ltd partnership.
Meanwhile, the research house viewed the potential implementation of the Regulated Asset Base framework in 2019 could be a rerating catalyst for MAHB stock as they would be able to raise passenger service charge (PSC) charges based on capital expenditure requirement.
On a separate note, Kenanga Research said the escalating spat between AirAsia and MAHB does not bode well for the future development of the sector, as this creates unnecessary worries among the public and investors with regard to the PSC.
MAHB earlier had served a writ of summons to AirAsia and AirAsia X Bhd for RM9.4 million and RM26.7 million respectively, in PSC that they had not and refused to collect from the passengers arising from the equalisation of PSC in Kuala Lumpur International Airport 2 from RM50 to RM73 for international passengers.
“We strongly believe that any differences and dispute between stakeholders should be handled professionally and through legal means.
“In our view, the equalisation of PSC charges is essential to promote a level playing field in the industry and it is unlikely to impact inbound international traffic volume, given that Malaysia has one of the lowest PSC charges in the region for international flights, and most importantly it bodes well with the government’s direction in promoting domestic tourism,” Kenanga Research said.
Yesterday, AirAsia’s share closed 1.35% lower, or four sen, to RM 2.92 for a market capitalisation of RM9.76 billion, while MAHB’s share closed 0.96% lower, or eight sen, to RM 8.25 for a market capitalisation of RM13.69 billion.