National Transport Policy seen as boon for aviation sector

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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Vehicle sales 1.43% higher

PETALING JAYA: Total vehicle sales increased 1.43 % on a year-on-year (y-o-y) basis, while production was up 1.22% y-o-y.

In MAA’s statement, sales for the passenger vehicle segment rose 1.49% y-o-y in September, with 40,266 units sold. Commercial vehicle sales also increased 1.04% y-o-y, with 4,400 vehicles sold.

On the production side, passenger vehicles increased 1.27% y-o-y in September, with 42,369 units produced. Commercial vehicle production fell 0.74% y-o-y with 2,732 units made.

However, according to a statement by the Malaysian Automotive Association (MAA), the sales volume for passenger and commercial vehicles was 13%, or 6,482 units lower month-on-month in September, compared with August 2019.

The MAA said the decline was due to a shorter working month, and people adopting a ‘wait-and-see’ attitude ahead of the Budget 2020 announcement.

Meanwhile, on a year-to-date basis, a total of 426,041 vehicles were produced, an increase of 1.01% compared with the previous corresponding period. Sales, however, declined 0.97% to 442,991 units, compared with 454,855 units sold the year before.

Looking ahead, the MAA said it expects vehicle sales for October to be better compared to September, due to a longer working month.

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Mixed earnings outlook for transport & logistics sector

PETALING JAYA: There appear to be no major catalysts for the transport and logistics sector from the Budget 2020 announcement, with the feasibility studies on infrastructure projects at Port Klang and the Visit Malaysia 2020 campaign already anticipated.

In a report, Affin Hwang Research said it was maintaining its neutral stance on the sector, with a mixed earnings outlook on the players in the space.

“Positively, we expect Westports and Malaysia Airports to report firmer 2020 earnings on volume growth, improving operational efficiencies, and higher passenger service charges Meanwhile, the airline operators should continue to see a subpar (but improving) margin trend due to stiff competition.

“Lastly, the logistics companies’ earnings should remain weak due to stiff competition and high operational costs,” it said.

Affin Hwang is raising AirAsia’s 2020-21 earnings forecasts by 2-3% and forecasting AirAsia X to report a smaller loss of RM41 million in 2020, from a RM68 million net loss.

“In tandem with our earnings revisions, we are raising AirAsia’s target price to RM1.91, from RM1.87, while maintaining our ‘hold’ rating. We are also revising AirAsia X’s target price to 16 sen from 14 sen with a rating upgrade to hold from sell,” the report said.

The research house is also lowering its Brent crude and ringgit projections in view of a more modest oil-demand outlook, normalisation of supply from Saudi Arabia and not-so-aggressive easing by the US Federal Reserve.

“On the whole, the oil market in 2H19 is still projected to see a 200,000 bpd (barrels per day) oversupply, and projected to widen to an average of 620,000 bpd in 1H20 based on the EIA’s Short Term Energy Outlook report in October 2019.

“With full recovery guided now to be by November and weak global demand expected to prevail, we believe any upside to oil prices could be relatively contained,” it said.

Affin Hwang’s 2020 Brent crude oil price assumption has been lowered to US$60-65/bbl from US$65-70/bb, while its ringgit projection now stands at RM4.20/US dollar by end 2020 from its previous projection of RM4.10/US dollar.

“Although Malaysia was retained in the FTSE Russell’s World Government Bond Index, its position remains in the Watch List, which reflects some lingering uncertainty about Malaysia’s position in the upcoming interim review in March 2020.”

Overall for the sector, Affin Hwang’s top pick is Westports with a target price of RM4.22 and a hold call.

“For exposure, we like Westports for its strategically located assets, strong management team and good earnings growth trajectory. These positives are, however, largely priced-in. Avoid logistics companies due to stiff competition and rising costs,” it said.

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Indonesia’s Lion Air set to list shares

JAKARTA: Indonesia’s Lion Air is set to launch an initial public offering, according to a company spokesman, in a listing that could reportedly raise up to $1 billion — one of the country’s biggest-ever share sales.

The fundraising by Southeast Asia’s largest airline comes after it suffered a recent customer data leak and a nearly one year after a high-profile crash that killed 189 people.

“It is true that Lion Air will proceed with an IPO,“ spokesman Danang Prihantoro told AFP. “The funds will be used to strengthen the company’s financial structure.”

He declined to comment on a timeline for the listing or how much the firm planned to raise.

Citing an unnamed sourced, Bloomberg News reported Thursday that Lion — which has postponed a public listing several times in the past — could raise as much as $1 billion.

That would make it Indonesia’s third-biggest IPO on record, according to Bloomberg data.

Last month, Lion said it suffered a data leak that reportedly affected millions of customers.

Two of the airline’s subsidiaries, Malaysia-based Malindo Air and Thai Lion Air, acknowledged passenger data may have been stolen from remote servers operated by Amazon.

All 189 people aboard a Lion-operated Boeing 737 MAX vanished from radar about 13 minutes after taking off from Jakarta last October, slamming into the Java Sea moments after pilots had asked to return to the capital. -AFP

Philippines AirAsia delays IPO to focus on reorganisation

MANILA: The Philippine unit of AirAsia Bhd is postponing its initial public offering (IPO) to next year or 2021 as it focuses on corporate reorganisation and seeking funds from existing shareholders, its chairman said today.

The low-cost airline has been looking to go public and raise around US$200 million (RM839 million) since 2015, but has shelved its plan several times because of weak markets and volatile oil prices.

“According to our estimated timeline, we are looking at the third quarter next year to first quarter of 2021,“ Philippines AirAsia chairman Joseph Omar Castillo told reporters.

Another major consideration would be a good performance of the stock market, Castillo added.

The company is being restructured after Filipino lawmaker Michael Romero bought out some investors in June to become the airline’s single largest stockholder. The budget carrier plans to raise cash through common and preferred shares.

Philippines AirAsia was looking at a US$600 million valuation and had planned to raise US$200 million this year to buy aircraft acquisition and expand its routes.

It aims to grow revenues by 39% to a record 29 billion pesos (RM2.3 billion) by carrying 10 million passengers this year, said Philippines AirAsia vice-chairman Shiela Romero.

The airline, which started its Philippine operations in 2012, has a fleet of 23 Airbus aircraft catering to Philippine and foreign routes. – Reuters

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