Growth for aviation sector predicted for next year

In a recent update, HLIB Research has given a resounding thumbs up to the aviation sector, maintaining its overweight rating and predicting a lucrative 2024 after a robust recovery this year.

The research powerhouse predicts a dazzling future for the industry, citing a surge in air travel demand, especially from international segments driven by the behemoths China and India.

According to HLIB, the sector is poised to reap the rewards of a double whammy – the expected depreciation of the US dollar and a decline in jet fuel prices. This winning combination is set to catapult the industry’s profitability to new heights.

HLIB predicts that as global activities and international travel requirements normalise, ASEAN travel demand is already bouncing back, and non-ASEAN international travel is catching up fast. Next year will be dominated by the international travel segment, fuelled by relaxed visa requirements for China and India.

The research house highlights the resilience of the aviation sector, overcoming the colossal setbacks of the 2020 pandemic. Even as the world faced unprecedented challenges, the industry managed to maintain its cash liquidity, riding the wings of a robust recovery in air travel demand throughout the current year.

Malaysia Airports Holdings Berhad (MAHB) emerges with a gleaming balance sheet, boasting 6.7 billion Ringgit in shareholders’ equity, 2.0 billion in cash, and a mere 640.6 million in short-term debt. HLIB noted that MAHB continues its winning streak, reporting a positive operating cash flow of 972.3 million for 9MFY23 and a handsome profit of 212.5 million.

Financial trouble

However, not all aircraft are cruising at the same altitude. HLIB reports that Capital A Bhd (CapA) is grappling with a turbulent financial storm. With a negative shareholders’ equity position of RM8.4 billion and a laundry list of short-term liabilities, CapA seems to be facing some turbulence, reported The Edge Malaysia.

HLIB revealed that CapA managed to flip the script, turning its operating cash flow positive with a reported profit of RM996.6 million for 9MFY23, driven by consolidating gains of Thai AirAsia in 2QFY23.

HLIB maintains an overweight stance with buy recommendations on both CapA (Target Price: 1.40 Ringgit) and MAHB (Target Price: 8.90).