KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
According to MIDF Research, strong demand has maintained airlines' load factor above pre-Covid levels during the second quarter of 2024 (2Q2024). Although Malaysia's full recovery in passenger traffic may face delays due to challenges such as aircraft delivery delays and shortages in parts and labor, a complete recovery appears inevitable.
Key Findings from MIDF Research:
Load Factor and Capacity Recovery:
- In the first half of 2024, the total seat capacity recovery reached 85%, with the average load factor increasing to 79%, which is 3.4 percentage points higher than in the first half of 2019.
- July 2024 showed a strong 92% recovery in passenger traffic, driven by international travel, which has outpaced domestic travel since November 2023.
Contributing Factors to Recovery:
- The return and introduction of foreign airlines have strengthened the recovery. The number of airlines serving Malaysia has increased to 71, compared to 69 in 2019, with five more airlines expected in the second half of 2024.
- A high-yield environment, with average fares rising to RM239 in the first half of FY2024 (34% above pre-Covid levels), also supports the recovery.
- The strengthening of the US dollar against the Malaysian ringgit (US$/MYR) benefits airlines, as nearly half of aviation operating costs are in US dollars. A 5% change in the US$/MYR exchange rate could impact airlines’ FY2024 earnings by 10%.
Sector Outlook and Performance:
- MIDF has maintained a "neutral" outlook on the sector. Capital A Bhd (KL) is its top sector pick with a "Buy" rating and a target price of RM1.06, due to its aviation business being less affected by recent sector disruptions.
- Capital A retained a robust fleet during the pandemic and is now focusing on expansion, reactivating 15 more aircraft, and receiving eight new deliveries in the second half of 2024. The airline's seat capacity recovery reached 79% in 2Q2024, with a strong average load factor of 90%. Passenger traffic is expected to recover to 89% in the third quarter of 2024 (3Q2024).
Malaysia Airports Holdings Bhd (MAHB):
- MAHB's performance benefited from improved passenger traffic, including operations in Malaysia and Türkiye (Istanbul Sabiha Gokcen International Airport, ISG), reaching 95% of pre-pandemic levels. This growth was driven by a 63% increase in international traffic at ISG compared to 2019.
Market Performance:
- Capital A’s shares rose by one sen or 1.3% to 77 sen, with a market capitalization of RM3.2 billion.
- MAHB’s shares increased by 12 sen or 1.2% to RM10.40, giving it a market valuation of RM17.4 billion.
Overall, while the Malaysian aviation sector continues to face challenges, strong demand, strategic expansions, and favorable currency conditions are contributing to the sector's recovery momentum.
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