Kenanga Research expects air travel to recover gradually from H221

By , in Nation on .

KUALA LUMPUR, April 2 — Kenanga Research is projecting a gradual recovery of air travel from the second half of 2021 (H221) despite optimism about the industry returning to normal sooner-than-expected with the availability of COVID-19 vaccines.

In a note today, the research house reiterated its neutral call for the aviation industry.

As for Q4FY20, both Malaysia Airports Holdings Bhd (MAHB) and AirAsia Group Bhd came in below expectations.

MAHB’s fourth quarter financial year 2020 (Q4FY20) revenue fell 34 per cent due to the re-imposition of the Conditional Movement Control Order (CMCO) across Malaysia, and curfew re-imposition in Turkey, effective November last year, due to a resurgence of COVID-19 cases.

Passenger traffic for the Malaysia operation contracted by 53.3 per cent (international: -33.3 per cent domestic: -54.8 per cent) to 2.1 million passengers compared to 4.5 million passengers in Q3FY20.


However, Kenanga Research said the yet to be signed Operating Agreement (OA) could be an impetus for a re-rating catalyst for MAHB.

“We believe the new OA will be investor-friendly and create a sustainable long-term development of MAHB, which has been hit by COVID-19 in terms of passenger traffic growth both in Malaysia and Turkey.

“We rollover our valuation from FY21 to FY22. Our target price is raised from RM6.86 to RM7.50,” it said.

Kenanga Research also reiterated outperform call on MAHB.

Meanwhile, the research house expects airlines, including AirAsia Group Bhd to continue facing tougher operating conditions at least in H1 2021 until the widespread availability of vaccines, as there could be a resurgence of sporadic COVID-19 infections.

Faced with losses on collapse in passenger loads, and cash flows challenges, AirAsia is in need to raise capital, it added.

“We view its recent fund raising, via new shares issue to shore up liquidity, positively as an interim measure to address its immediate cash-flow requirements during this on-going pandemic.

“AirAsia is navigating its recovery phase exceptionally well as key operational metrics improved in December in comparison to September, notably with a 31 per cent increase in passengers carried by AirAsia Thailand, doubling of passengers of AirAsia Philippines, while AirAsia Indonesia multiplied its number of passengers by a whopping 11 times,” it said.

These improvements signify a solid rebound for air travel demand across the group’s key operating markets.

On an effort to reduce operating expenses, the group has undertaken cost cutting measures such as right sizing of manpower, salary cuts for management, staff and directors, negotiation of deferrals with lessors, suppliers and partners, and restructuring of fuel hedging positions.


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