PETALING JAYA: The newly launched National Transport Policy 2019-2030 (NTP) is expected to be a boon for the aviation sector, according to analysts.
MIDF Research highlighted that the Malaysia Airport Holdings Bhd’s (MAHB) efforts such as the Joint International Tourism Development Programme with Tourism Malaysia will facilitate airlines in promoting Malaysia overseas.
In addition, the policy paper also brought attention to the trend towards the development of secondary airports to cater to the booming low-cost travelling, as well as plans to restructure the regulatory bodies in the aviation sector.
“This in turn would bode well for MAHB’s strategy to attract more airlines and increase connectivity which will moderate effects of the international departure levy and possibly higher passenger service charge,” the research house said in a report.
Furthermore, the move by low cost carriers such as AirAsia to strengthen its presence in core markets while establishing new hubs in destinations such as Lombok is expected to continue to attract higher passengers in 2019 and will benefit MAHB, according to MIDF.
With the NTP, the Ministry of Transport will review and update rules, act and regulations as it seeks to improve logistics connectivity to cater to the e-commerce boom, continuous ports upgrade and expansion plans, and enhance productivity and increase competitiveness for transportation sector with the aim of creating a robust and adaptable regulatory framework that supports the future needs of transportation.
To do so, the ministry is looking beyond the regulated asset base (RAB) framework to drive investment in the public transportation sector.
“Overall, we believe that the RAB framework will ensure a fair cost to airport users while maintaining a fair level of returns to MAHB as it increases clarity between revenue and capital investment,” said MIDF.
It believes that MAHB passenger numbers for Malaysian operations can surpass the 100 million mark in 2019, while maintaining a relatively conservative growth rate of 3.5% at approximately 102.5 million passengers.
With regard to the transportation sector, MIDF Research applauds the plans in the latest NTP as it signals a paradigm shift in the making.
“We remain optimistic on Malaysian ports given their strategic location along major trade lanes and the economic prospects of the Asean region driven by the emergence of regional distribution hubs,” it said.
However, the research house cautioned that the anticipated higher demand of e-commerce activities will attract more new entrants for the logistics industry, prompting price competition and compressing margins.
“All factors considered, we maintain our neutral stance on the transportation sector.”
On the other hand, AmInvestment Bank Research (AmResearch) expressed a more subdued outlook on aviation sector.
It stated that prospects of airlines and airport operators are favourable backed by tourist arrival growth projected at 12% to 30 million in 2020 by Tourism Malaysia on the back the Visit Malaysia Year 2020.
“However, this is offset by cost pressure at AirAsia following the sale and leaseback of its aircraft,” said the research house.
It also expressed a neutral outlook on the transportation sector.
“While we believe the initiatives in the NTP are positive to the transportation sector, they will take time to materialise.”
AmResearch said the seaport operators are beneficiaries of the US-China trade war and trade diversion, as reflected in the increased throughput recently.
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PETALING JAYA: Malaysia’s corporate earnings for the second quarter have been described as “uninspiring and not very encouraging” by analysts amid pressure from the US-China trade war and low commodity prices.
Public Investment Bank head of research Ching Weng Jin commented that corporate earnings have not been very encouraging so far.
He identified the plantation and aviation sectors as those that underperformed in the second quarter as well as some weaknesses in the property sector.
“By and large, the banks have been doing okay with a few surprises,” Ching told SunBiz.
For the second quarter of 2019, Malaysia posted gross domestic product (GDP) growth of 4.9%, higher than market expectations of 4.7%.
Despite that, Ching said, there is a mismatch as there has been a slowdown in business activity and consumer spending due to lack of confidence stemming from the ongoing trade tensions between the world’s two largest economies.
To boost market sentiment, he said, Budget 2020 could be one of the drivers, especially with the introduction of expansionary measures.
Since the US-China trade war broke out a year ago, there have been no signs of a resolution between the two economic powerhouses; instead, tit-for-tat retaliation has escalated the tensions.
“If there is no progress on the external uncertainties, it is likely to be business as usual, a similar path to what we saw in the equity market in the first half of 2019,” said Ching.
JF Apex Securities head of research Lee Chung Cheng offered a similar view, stating that he expects the equity market to be subdued despite Malaysia’s strong economic performance in the second quarter.
“Corporate earnings for this quarter have been uninspiring, as most come in within or under market expectations,” he said.
He pointed out even the banks failed to beat market expectations, while the poor performance from the plantation sector was within expectations.
Meanwhile, the manufacturing sector performed below the research house’s expectations due to the ongoing US-China trade dispute.
Lee noted that Malaysian equities are trading at a premium compared with their counterparts in neighbouring countries.
“Malaysia’s earnings per share growth is behind some of the markets in the region. Indonesia and the Philippines have a better corporate growth for the year,” he said.
The FBM KLCI has declined 4.6% year to date. Bursa Malaysia’s benchmark closed at 1,612.14 points last Friday, down from 1,690.58 points at the end of last year.
During the same period, the Finance Index has dropped 10.1% to 15,550.02 points from 17,296.47 points, while the Plantation Index has slipped 0.2% to 6,889.48 points from 6,902.96 points.
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