Upbeat on future airport traffic on extended holidays, travel momentum
KUCHING: A slowdown in passenger traffic last month across all Malaysian airports was no deterrent to analysts anticipating better figures for Malaysia Airport Holdings Bhd’s (MAHB) second half outlook.
Notably, traffic’s growth from Malaysian airports turned negative in May at minus 3.5 per cent year on year (y-o-y), recording a total of 7.7 million passengers.
This was primarily due to the seasonally subdued air travel demand during the Ramadan fasting season as well as shift in school holidays in Malaysia, said MIDF Amanah Investment Bank Bhd (MIDF Research).
“While we note that overall traffic has experienced a slowdown since April, we believe it will rebound in June 2018 and will provide support to traffic in the first half of 2018 (1H18),” it said in a report yesterday.
“International sector was slightly down. Domestic traffic in May declined by a larger magnitude, contracting by 6.4 per cent y-o-y to 3.7 million passengers. However, international passengers were flattish at minus 0.6 per cent y-o-y, due to the same reasons mentioned earlier.
“However, we expect the momentum to rebound in June, buoyed by key events, namely Hari Raya Aidilfitri, an extended school holidays in Malaysia and summer holidays for countries in the northern hemisphere.”
Looking at the Istabul Sabiha Gocken Airport -- an international airport under MAHB’s purview -- this airport continued to chart positive progress, although tepid at 1.5 per cent y
Both international and domestic sectors at the Istabul Sabiha Gocken Airport grew at similar rate of circa 1.3 per cent and 1.8 per cent y-o-y respectively.
“Evidently, growth was only marginal, also affected by the Ramadan fasting month. While the air travel activities in May have not been upbeat, we are expecting the growth of ISG’ traffic to recover in June, benefiting from worldwide seasonal factors,” MIDF Research said.
This led the research firm to expect a rebound in June for passenger traffic, driven by higher international passengers and seasonal factors.
“The shift in two-week school holidays in month of June should reflect positively to air travel demand during the month. This will be further supported by major public holidays namely Hari Raya Aidilfitri and worldwide summer holidays.
“We expect the strong momentum of traffic flow primarily international to remain, coming from the long holidays in countries such as China.
“It is worth noting that Chinese tourists represent a significant portion of international traffic which we attribute to the relaxation of visa permit to Malaysia and demographic factors.”
The occurrence of golden week in October is also expected to encourage outbound travel among Chinese tourists, said MIDF Research. Consequently, it believed revenue from retail segments to benefit MAHB given higher footfalls expected in the month of October in airports.
“In consideration of these stimulants, we remain upbeat on MAHB’s ability to post a decent traffic growth in 2018. Accordingly, we have a buy call on the stock with unchanged target price of RM9.88.”
On this point, Kenanga Investment Bank Bhd (Kenanga Research) the anticipated Quality of Service (QOS) framework to be implemented by Malaysian Aviation Commission (Mavcom) from 3Q18 for airports with objectives to achieve higher quality of service for passengers could pose as downside risks for MAHB’s earnings given that Mavcom has proposed a financial penalty of up to five per cent ofaeronautical revenue.