KUCHING: For Malaysia’s aviation sector, analysts are positive about AirAsia Bhd’s (AirAsia) growth plans while they expect slightly slower traffic growth for Malaysia Airports Holdings Bhd’s (MAHB) Malaysian operations.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) explained that it is more positive on MAHB’s operations in Turkey and it targeted a double-digit growth rate in the financial year 2018 (FY18) of 10 per cent.
“Meanwhile, we are targeting a slightly lower growth rate in Malaysia of eight per cent due to higher passenger base, absence of booster like the Southeast Asia games in 2017, and weaker currency advantage for foreigners from the stronger ringgit,” it said, noting that the typical passenger growth rate for Malaysia since 2007 is from 0.6 to 18.6 per cent.
“Also, we are positive on the passenger service charge (PSC) equalisation of KLIA Main and klia2 whereby international ex-Asean flights out of klia2 in FY18 will be RM73 which we have factored into our FY18E core net profit of RM315 million,” it said.
As for AirAsia’s growth, Kenanga Research said it is positive on AirAsia’s plans to further consolidate its remaining associates; Thai, India, and China. It noted that recently, AirAsia has concluded the listing of its Indonesian associate and it planned to list its Philippines associate by 2018.
“We are generally positive on the listing of its associates as this allows for their respective associates to tap into their local capital markets to expedite growth,” it said.
Aside from that, it noted that cumulatively, for FY17, AirAsia has expanded its aircraft fleet by a net growth of 24 planes; Malaysia (an increase of seven planes), Thailand (an increase of five planes), Indonesia (an increase of one plane), Philippines (an increase of three planes), India (an increase of six planes) and Japan (an increase of two planes) bringing total aircraft capacity in FY17 to 196 while still having a total outstanding aircraft order log of circa 410 aircrafts.
“On the back of the increased capacities, we believe AirAsia will be able to maintain healthy load factors of circa 85 per cent stemming from strong travel demand, coupled with their extensive route options with optimal frequencies,” it opined.
Despite the increased capacity of five per cent in the first nine months of 2017 (9M17), Kenanga Research said yields were surprisingly not pressured but registered a growth of two per cent instead.
“This is due to other airlines (Malindo and MAS) rationalising their routes frequencies to avoid intense price wars and seek for more profitable routes elsewhere,” it explained.
“Moving into FY18, AirAsia plans for further fleet growth of another 29 planes which we are positive on the back of increased travel demand.
“For FY18, AirAsia also aims for increased ancillary income from more targeted marketing/sales in which they have targeted RM60 per pax by FY18 (9M17 at RM49 per pax),” it added.
Meanwhile, Kenanga Research said in line with AirAsia’s promise to dish out special dividends at least once every two years, it is positive on AirAsia’s plans to continue unlocking assets for special dividends with the upcoming sale of Asia Aviation Capital (leasing arm) within the near horizon.
“We believe this is the first of many more assets to be unlocked such as their inflight food and beverage business ‘Santan’, and ‘ROKKI’, which provides Wifi service onboard,” it added.
All in, Kenanga Research maintained an ‘overweight’ call on the sector given the growth prospects of AirAsia and MAHB coupled with market weightage for counters under the coverage that have more than 10 per cent upside.
Source: Borneo Post Online