• The positive progress in the development of Covid-19 vaccines by several manufacturers has paved the way for the recovery of the aviation sector.
• Importantly, the government of Malaysia and our key travel partners have ambitious plans to vaccinate a sizeable percentage of the population in 2021. When the vaccinations for the masses start, we expect an improved confidence to drive a sustainable recovery in air passenger movements.
• Maintain BUY. We recommend investors look beyond the immediate weakness and start positioning for a strong earnings recovery in 2022E.

Malaysia to purchase Covid-19 vaccines for 83% of population; governments for key destination / origination countries also have major vaccination plans

In December 2020, a number of countries (ie, the US, UK, EU, Canada, Singapore, Bahrain and Saudi Arabia) have approved the Pfizer-BioNTech Covid-19 vaccine. This, and good progress from several other vaccine manufacturers, have paved the way for the recovery of the aviation sector. We are encouraged by the Malaysian government’s plan to purchase Covid-19 vaccines for 83% of its population. Once administered, it is expected the country should achieve herd immunity and this should boost confidence for travel. Importantly, the governments for most of our key air passengers’ destination / origination countries (except Vietnam) also have plans to vaccinate a sizeable percentage of their populations in 2021.

Globally, more countries are easing travel restrictions

70% of global destinations have eased restrictions on international tourism, according to UNWTO’s 8 th report on Covid-19 related travel restrictions. Europe continues to lead in easing travel restrictions, followed by the Americas, Africa and the Middle East. Asia is still conservative, where 59% of its destinations are still closing their borders completely. Looking ahead, we expect the Malaysian government to gradually ease the travel restrictions starting 2Q 2021 after the end of the winter season, peaking of Covid-19 cases in Malaysia and increased adoption of the Covid-19 vaccines.

Maintain BUY with an unchanged price target of RM6.65

We forecast MAHB to continue reporting losses in 1H21 before turning to profitability in 2H21E. Despite the challenging immediate business outlook, we recommend investors look beyond 2021 and start positioning for an earnings recovery in 2022, driven by strong underlying demand for travel and MAHB’s proactive business optimisation / cost-saving initiatives.

Source: Affin Hwang Research - 31 Dec 2020