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Asean Airports Set For Travel Boom

SIX Asean member countries are poised for aggressive growth in their aircraft fleet count and new airport infrastructure.

The growth follows expected strong passenger traffic growth in Malaysia, Singapore, Thailand, Indonesia, the Philippines and Vietnam, and also indicates a brighter outlook on industry earnings.

In the race for earnings growth, Muhibbah Engineering Bhd has become Nomura’s industry top pick, replacing Malaysia Airports Holdings Bhd.

Nomura said Asean’s fleet size was expected to grow by eight per cent to 1,613 aircraft this year and six per cent to 1,707 aircraft next year.

“This marks a compound annual growth rate (CAGR) of nine per cent over the 2012-2016 period, and given continued aggressive expansion plans by most local carriers in Asean, we estimate 2016-2019 fleet count to achieve a six per cent CAGR,” it said

Nomura believes Muhibbah Engineering’s lucrative Cambodian airport assets are significantly undervalued, with its construction business an added bonus.

“For Muhibbah Engineering, we conservatively pencil in low order book replenishment averaging at RM550 million annually from both construction and crane manufacturing divisions.

“Despite the softness in new order book replenishments, we expect Muhibbah Engineering to register double-digit earnings growth of 12 to 30 per cent during financial years 2017 and 2019, underpinned by its growing Cambodian airport associate entity, Societe Concessionaire De I’Aeroport (SCDA),” it said.

SCDA holds three airport concessions in Cambodia and has seen an impressive 26 per cent growth in passenger traffic across all its airports for the nine-month period.

Nomura said airports, unlike airlines, were beneficiaries of Asean’s air travel potential without exposure to earnings risk on competition and oil prices.

With airport assets’ utilisation likely to be maximised on higher traffic, coupled with the operating leverage effect, airport operators were poised to see improved profitability outlook on margins and earnings, said the research firm.

Nomura said Asean air passenger traffic might hit 2.21 billion annually by 2036, potentially requiring US$73.2 billion (RM304 billion) in investments on new airport infrastructure.

The research house said Asean was the biggest market for Chinese outbound traffic at 21.2 million tourist visits, accounting for 22 per cent of its total global outbound traffic excluding day trips.

Nomura expects Asean airports to have handled as many as 654 million passengers last year, which is bigger than the traffic of both China and India combined.

“Although delta in growth from passenger air traffic for airports has been stimulated by the growing inbound arrivals, we see growth potential in outbound demand,” it added.


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