• China and Malaysia will permit reciprocal visa-free entry from 1 Dec 2023 and Malaysia will unilaterally extend the same to India and the Middle East.

• We see this as a major positive for MAHB; reiterate Add with unchanged SOP-based target price of RM7.76.

Malaysia Joins a Select Group of Visa-free Countries for China Visits

• On Friday, 24 Nov 2023, the Chinese government announced that it will permit Malaysian nationals 15-day visa-free entry from 1 Dec 2023 to 30 Nov 2024 on a trial basis for business, tourism, visiting relatives and friends (VFR), and transit purposes. Five EU countries were also permitted the same privilege. Visas into China are still needed for study and work purposes as well as for stays of more than 15 days.

• Prior to this, citizens of only 15 countries were permitted to travel to China for up to 30 days without a visa; these are small countries with low populations, namely Armenia, the Bahamas, Barbados, Belarus, Bosnia and Herzegovina, Dominica, Fiji, Grenada, the Maldives, Mauritius, San Marino, Serbia, Seychelles, Suriname, and the UAE.

• Up till 1 Dec 2023, citizens of only three countries, i.e. Singapore, Brunei and Japan, were permitted up to 15 days of travel into China without a visa. From 1 Dec 2023 to 30 Nov 2024, Malaysia, France, Germany, Italy, the Netherlands, and Spain will join this elite list. In other words, Malaysia joins a select group of countries that have unfettered access into the whole of China for up to 15/30 days without a visa for general tourism, business, or VFR purposes. This is a major diplomatic win for Malaysia, in our view.

• China has a separate arrangement for citizens of 54 countries, who are permitted to transit in China without a visa for either 24 hours, 72 hours or 144 hours (six days) as long as they have an onward travel arrangement to a third country. However, this is specifically for transit purposes only and not for origin -and-destination travel.

Chinese Traffic Is Lagging Behind; Visa Exemption Could be Catalyst

• On Sunday, 26 Nov 2023, Malaysian Prime Minister Datuk Seri Anwar Ibrahim announced that effective 1 Dec 2023, Malaysia will allow 30-day visa-free entry for visitors from China, India, and selected countries from the Middle East (Saudi Arabia, Bahrain, Kuwait, United Arab Emirates, Iran, Türkiye, and Jordan). No additional details were announced and we do not yet know if the visa exemption has an expiry date but we suspect that it will tentatively end on 30 Nov 2024.

• The back-to-back announcements by the Chinese and Malaysian governments are very positive for MAHB’s passenger traffic recovery and we expect this to be warmly received by investors. Thailand had launched a unilateral visa-free programme for Chinese visitors for six months between 25 Sep 2023 and 29 Feb 2024, without reciprocity from China. By comparison, we expect the reciprocal arrangement between China and Malaysia to trigger great interest for mutual travel.

• Last week, airline seats between Malaysia and China were only 55% of the equivalent week in 2019 (compared to 78% for Indonesia, 79% for India, 85% for Thailand, and 89% for Singapore), suggesting plenty of scope for travel to/from China to recover. Travel between Malaysia and China made up 11.2% of MAHB’s total international pax in Malaysia in 2019, second to Indonesia (which made up 18.4% of the same), but more than Singapore (9.5%), Thailand (9.4%), and India (8.1%). Malaysia’s visa exemption for India also tackles a major regional source market for visitors. Meanwhile, the Middle East travellers granted visa exemption by Malaysia made up only c.3.5% of international pax in 2019, excluding the umrah/Haj pilgrims to Saudi Arabia that made up another 2.5%. Still, we welcome every little bit of incentive for travellers to come to Malaysia.

• MAHB is releasing its 3Q23F results on 29 Nov; the key rerating catalyst is positive guidance on its pax traffic and commercial revenue restoration, in our view; MAHB recently said that 90% of its tenanted airport shops should be open by end -2023F. Downside risks include possible delays in the signing of the new Operating Agreement, which MAHB had said it expects to sign next month, and delays in the gazette of new aeronautical tariffs by Malaysia Aviation Commission (MAVCOM).

Source: CGS-CIMB Research - 27 Nov 2023