MAHB earnings correlate to open borders

The company’s earnings will improve on higher PSCs which is 5 to 7 times more compared to domestic travellers. 


MALAYSIA Airports Holdings Bhd’s (MAHB) earnings will improve with the reopening of international travel leading CGS-CIMB Securities Sdn Bhd Research to reiterate its ‘Add’ call on the airport operator with a target price of RM6.95. 

MAHB’s earnings capacity will improve on higher passenger service charges (PSCs) benchmark for international passengers which is five to seven times more compared to domestic travellers. 

“The potential for new entrants to the Malaysian aviation industry will also be stimulated through low promotional fares, price competition and earning from duty-free outlet shopping,” the broker stated in a report yesterday. 

CGS-CIMB noted a fuller and more robust recovery in MAHB’s international passenger traffic will depend on whether neighbouring countries uplift their border restriction and move the entry to quarantine-free regulations. 

Currently, the vaccinated arrivals into Malaysia must be quarantined for five to seven days, with the exception of Vaccinated Travel Lane (VTL) arrivals from Singa- pore, while unvaccinated arrivals must quarantine for 10 days. 

“Once the restriction is lifted, we anticipate a steady boost to Malaysia’s international passenger traffic,” CGS-CIMB stated. 

The National Recovery Council has proposed that Malaysia fully reopen its borders without mandatory quarantine from March 1 while the Covid-19 pre-departure and on-arrival tests remain. 

CGS-CIMB forecast MAHB’s domestic passenger traffic will recover to 70% of 2019’s level in 2022 from 18% in 2021, while international passenger movement levels will rise to 25% of 2019’s level in 2022 from 2.6% in 2021. 

In December 2021, domestic travellers’ movement had recovered to 58% of the pre-pandemic period. 

“As such, we are hopeful the pace of regional reopening can be accelerated, allowing us to raise our forecast. We reiterate our ‘Add’ call with the higher target price and are optimistic of MAHB making decent earnings in the future,” it noted in its report on the company whose share price has risen by some 10% since the announcement on border reopening was made. 

Despite the positive news, downside risks include further delays in reopening due to the surge of omicron cases. 

CGS-CIMB added full border reopening is critical for the aviation sector given there is pent-up demand for international travel, and international services can help absorb aircraft capacity due to the potentially longer flight distances.