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Wednesday, March 15, 2017

Aviation stocks to fly high in 2017 – Maybank IB

Author: Tan KW | Publish date: Wed, 15 Mar 2017, 10:59 AM
By Samantha Ho / | March 15, 2017 : 10:35 AM MYT

KUALA LUMPUR (March 15): Although share prices of aviation stocks have soared since the start of 2017, there is further upside to be had, according to Maybank IB Research.

In a sector update today, the research house said supply would slowly match demand by the end of the second quarter of 2017 (2Q17), until which high load factors with stable yields are expected to continue.

"On that premise, we still forecast for a sector profit decline in 2017 albeit at a lower quantum of 6% versus our original 22% on Malaysia Airport Bhd's (MAHB's) revised forecast," analyst Mohshin Aziz said.

The growth of the country's total fleet size by 18 aircraft in 2017 to a total of 262 aircraft supports Maybank IB's 8% traffic growth estimate, Aziz said.

Meanwhile, the fear of a fare war does not concern the research house as a tight supply of middle to upper-level pilots may inhibit local carriers' ability to conduct a sudden increase in growth plans.

The fear arose from an unconfirmed industry rumour that Malaysia will take up 40 aircraft in 2017 above an originally announced 17, However, thus far, all carriers are maintaining capacity discipline and only AirAsia has raised its fleet guidance by one aircraft this year - which is hardly a concern, Mohshin said.

Year-to-date (YTD), share prices of MAHB, AirAsia Bhd and AirAsia X Bhd have grown between 12-27%, after recording strong fourth quarter (4Q16 core earnings).

All of the stocks have outperformed the 4.9% YTD gain of the FBM KLCI.

The research house maintained "buy" calls on Malaysia Airports Holdings Bhd and AirAsia Bhd while it maintained a "hold" on AirAsia X Bhd.

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