KUALA LUMPUR – RHB Research today said the worst was over for the aviation sector, reiterating its “neutral” rating for the transportation sector as a whole.
It also upgraded Malaysia Airports Holdings Bhd (MAHB) to “buy” from “neutral”.
“The market has yet to reflect the full potential upside from MAHB,” said RHB Research analyst Alexander Chia, adding that this would be an essential catalyst for the tourism industry.
“The government has targeted five million tourist arrivals from China this year and there are encouraging initiatives to date by the government and MAHB to realise this,” he said in a statement.
In 2019, China had the second highest number of inbound tourists to Malaysia.
Chia noted that there were a few key events in mid-2QFY2023 (the second financial quarter ending June 30).
Among these are the finalised gazetted passenger service charge and loss capitalisation mechanism in the third consultation paper, as well as the new operating agreement with the government.
However, he noted there was a decline in airfreight demand due to high inflation rates, ocean overcapacity, and high inventory levels.
He also said ocean freight demand is flattening out but there were signs of potential recovery and easing of congested ports.
Despite lower demands, he said capacity recovery for airfreight will continue, on the back of improvements in belly capacity, as both businesses and passenger leisure travel begin to recover.
Though air freight rates had come off their mid-2022 peak, the market remains competitive due to higher-than-normal jet fuel prices (higher than US$100 per barrel).
“Demand for travelling has also picked up,” he added.
Chia also noted that ocean freight rates continue to slide, but at a much slower pace, and have returned to pre-pandemic levels, as capacity across ports is freed up.
The research house also said it prefers third-party logistics players with diversified businesses that are able to sustain their earnings and offer a buffer against the unfavourable environment that freight companies have to weather.
It named Tasco Bhd as the research house’s top pick, with a “buy” rating and a target price of RM1.86, underpinned by its strong global presence that enables the group to expand into the fourth-party logistics business, handling the entire supply chain management for its key client. – The Vibes, April 27, 2023
