• Turkey went into full lockdown at end-April as the number of Covid-19 cases surge. The nationwide lockdown, weak domestic economy and weak Lira should affect the performance of MAHB’s ISG International Airport
• In Malaysia, the closure of the national and state borders may last longer than our earlier expectations due to the rising number of Covid-19 cases and slower-than-expected progress in the vaccination program
• We cut the 2021-23E earnings after lowering our passenger movement projections. Maintain HOLD with a lower PT of RM5.80

Turkey Went Into Full Lockdown at End-April as Covid-19 Cases Surge

MAHB’s Istanbul Sabiha Gokcen International Airport (ISG) was a relatively bright spot among its airports during 2H20 due to the early reopening of Turkey’s international borders in June 2020. However, the country is seeing a 3rd Covid-19 wave and the Turkish Government had on 29th April 2021 implemented a full lockdown, its strictest one of the pandemic. While its international border is still opened, we expect the lockdown to affect domestic passenger movements and discourage foreigners from visiting, thereby affecting ISG’s performance.

In Malaysia, the relaxation of border controls may be delayed into late 2021/22

The number ot Covid-19 cases in Malaysia is rising and the media has reported that the government may soon tighten the movement restrictions. Separately, the pace of vaccination is lagging behind our expectations due to supply constraints. While we expect the pace of vaccination to pick up in May 2021, the road to full recovery is likely a long and uneven one. In view of these, we now expect the interstate travel ban to be lifted only in 4Q21 (from an earlier expectation of 2Q21) and the country’s border to only reopen gradually in 2022 (from 2H21).

Cutting 2021-23 earnings forecasts, maintain HOLD at lower PT of RM5.80

We now expect MAHB to report a larger core net loss in 2021 and cut our 2022-23 earnings forecasts by 24-50% after incorporating lower passenger movements, taking into consideration the implementation of the full lockdown in Turkey, prolonged closure of Malaysia’s country and state borders, emergence of new Covid-19 variants and slower-than-expected vaccination rollouts in Malaysia and other countries. In tandem, we lower our SOTP-based price target to RM5.80 (from RM6.50). Notwithstanding the challenging immediate business outlook, we believe investors has looked beyond the current weakness and are positioned for an earnings recovery in 2022. Maintain HOLD.

Source: Affin Hwang Research - 4 May 2021