MAHB to see less passenger traffic in March

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With the Movement Control Order in place, a further decline in international passenger traffic is anticipated amidst travel restrictions for outbound travel for locals and inbound travel for foreigners over a 14-day period. — Bernama photo

KUCHING: Malaysia Airports Holdings Bhd’S (MAHB) passenger traffic for March 2020 will likely see a larger decline than February 2020 following the newly announced Movement Control Order effective today.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recalled that the February 2020 passenger traffic for MAHB’s airports – excluding ISGA in Istanbul – declined by 23.4 per cent year on year (y-o-y) to 6.2 million passengers in the absence of the Movement Control Order.

“Therefore with such order in place, we expect to see a further decline in international passenger traffic amidst travel restrictions for outbound travel for locals and inbound travel for foreigners over a 14-day period,” it said in a note yesterday.

Based on its preliminary analysis, the drop in passenger traffic for MAHB’s airports in Malaysia could reach more than 30 per cent y-o-y for March 2020.

“Therefore, we have adjusted our passenger traffic forecast in financial year 2020 (FY20) to 98.1 million (previously 100.1 million), representing a six per cent y-o-y decline,” it added.

On domestic flights, the research arm noted that these are still ongoing as per airlines schedule. Nevertheless, it understood that domestic flights are subject to airlines schedule as airports, along with essential services, will remain open during the 14-day period.

“The stimulus package announced by the government of Malaysia which covers domestic tourism will then partially support domestic traffic especially during major festive period such as Hari Raya Aidilfitri in May 2020 provided that fears of Covid-19 have gradually waned by then.”

In addition to the adjusted passenger traffic forecast, MIDF Research took the opportunity to reduce retail and rental revenues further as the research arm’s observations indicate that there is lower footfall at its retail premises.

As a result, the research arm has revised its earnings estimates lower by 13.2 per cent, 6.7 per cent and 3.7 per cent for FY20E, FY21F and FY22F respectively.

MIDF Research,in turn, revised its target price for MAHB to RM6.81 per share, from RM7.65 previously, after taking into account of the effect of the revised annual passenger traffic forecast and lower retail and rental revenue.

“While the Movement Control Order will adversely impact international passenger traffic, we believe that such sacrifice is of utmost importance in containing the Covid-19 pandemic.

“As such, we continue to reaffirm our view that the passenger traffic will see a nascent recovery in the second half of current year 2020 (2HCY20) if the Covid-19 pandemic subsides.

“Our basis for the upside in 2HCY20 comes after around three million seats were added to the scheduled airline capacity in China in the preceding week, offering early signs of revival as the infection rate of Covid-19 slows down in China.”