KEY INVESTMENT HIGHLIGHTS

• WHO determined that the coronavirus is not yet a global health emergency

• Tourist arrivals in ASEAN and Malaysia took a breather in 2003 during the SARS outbreak

• Nevertheless, passenger growth in Malaysia and even China took an average of two to three months to recover to the normal level

• Assuming no major coronavirus outbreak in Malaysia, tourists from India could offset the potential decline from China

• No changes to our earnings estimates

• Maintain BUY with an unchanged TP of RM8.98 per share

Coronavirus; not yet a global health emergency. The world has raised the alarm on the coronavirus (2019-nCoV) spread from Wuhan, China. The coronavirus originates from the same viral family of the Severe Acute Respiratory Syndrome (SARS) which had an outbreak from November 2002 to July 2003. Meanwhile, the World Health Organisation (WHO) on 23 January 2020 had determined that the outbreak of the coronavirus spreading rapidly across China is not yet a global health emergency. The decision came after: (i) independent experts spent two days assessing information about the spread of corona virus; and (ii) Chinese authorities moved to lock down three cities on Thursday and canceled major events in Beijing during the Lunar New Year holiday period.

ASEAN tourist arrivals growth. In ASEAN, China contributed the most to the tourist arrivals in 2018 at around 21.0%. As for the period of the SARS outbreak, tourist arrivals from China in ASEAN declined by - 15.6%yoy in 2003, more than the -12.3%yoy drop seen in total tourists arrivals in the region. Likewise, Malaysia saw a -37.1%yoy drop tourist arrivals in 2003 when the contribution of China to Malaysia’s tourist stood at 4.2% compared to 11.4% in 2018.

Impact on MAHB passenger traffic. Due to the SARS outbreak in 2003, MAHB’s passenger traffic growth in Malaysia took a breather that year to drop by just -1.5%yoy to 33.5m. In addition, total international passengers at KLIA Main Terminal travelling to and from China declined by -10.7%yoy during the same period. Nevertheless, recovery was fast, with passenger traffic at MAHB’s Malaysian airports rebounding +17.8%yoy in 2004. Similarly, international passengers from China at KLIA Main Terminal recorded a whopping +75.8%yoy growth in 2004. On a side note, Istanbul Sabiha Gokcen (ISG) airport which was not operated by MAHB at that time saw a +20.6%yoy passenger traffic growth in 2003.

Source: MIDF Research - 24 Jan 2020