PETALING JAYA: The approval for Firefly to resume flying to Singapore but to Seletar Airport instead of Changi Airport effective late April will pave the way for other airlines to fly to Seletar, according to MIDF Research.
“While we view the resumption of Firefly’s flights to be minimal towards Malaysia Airports Holdings Bhd’s (MAHB) earnings, we believe that this news would pave way for other airlines such as Malindo Airways to operate flights between Subang Airport and Seletar Airport in the future,“ the research house said in a report today.
Moreover, it said this will facilitate the commute of passengers residing in the Klang Valley to Singapore due to the location of Subang Airport which is nearer to cities in the Klang Valley.
“On a separate note, the regeneration of Subang Airport will enable Malaysia to attract more aerospace related activities in Malaysia as 4,000 new aircraft are expected to be delivered to the Asean region by 2037,“ it added.
Malaysia and Singapore ended its aerospace disputes following the withdrawal of Singapore’s Instrument Landing System procedures for its Seletar Airport. Meanwhile, Malaysia will indefinitely suspend its permanent Restricted Area over Pasir Gudang.
Firefly’s flights to Singapore were suspended on Dec 1, 2018 as they were remaining matters in relation to Singapore’s plans to move turboprop aircraft operations from Changi Airport to Seletar Airport.
The Kuala Lumpur-Singapore route is the top Asia Pacific international route. Firefly is ranked higher than Jetstar Asia in terms of number of flights for this route.
MIDF said the international sector contributes around 8% to the total passengers handled at Subang Airport which in turn makes up only 3% of MAHB’s total passengers in Malaysia. The majority of international flights at Subang Airport is operated by Firefly for the Subang to Changi route while Malindo Airways operates international flights to Hat Yai, Thailand on a seasonal basis.
Nevertheless, the suspension of Firefly flights from Subang to Changi during late last year only saw the passenger service charge (PSC) collection reduce by less than RM500,000, based on MIDF’s analysis, immaterial to MAHB’s overall top line of above RM4.5 billion.
“Therefore, we expect the resumption of flights by Firefly to and from Seletar Airport to bring back PSC collection levels to normal but with minimal impact to MAHB’s overall earnings. As such, we are maintaining our earnings estimates for FY19 and FY20 at this juncture.”
MIDF believes that MAHB will maintain its upward trajectory especially in terms of passenger growth amidst the relaxation of visa policies for Chinese and Indian nationals visiting Malaysia. Moreover, it expects MAHB’s efforts in not only attracting more new airlines but also offering increased connectivity to moderate the effects of the departure levy set to be imposed in June 2019 for outgoing international passengers.
“As such, we reiterate our optimism that MAHB passenger numbers will surpass the 100 million mark in 2019, while maintaining a relatively conservative growth rate of 3.5%. All things considered, we maintain our ‘buy’ call on MAHB with a target price of RM9.44 per share as it is a proxy to Malaysia’s inbound/outbound travel industry, being Malaysia’s largest airport operator.”
It opined that its undemanding valuations of a trailing price-to-earnings (PE) ratio of 18.3 times, compared to the average of its regional peers with a PE ratio of nearly 50 times presents a good opportunity for investors to accumulate the stock.