Recovery of Tourism in Malaysia

15 Jul 2022

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Since the reopening of borders on 1 April 2022, Malaysia exceeded its initial target of 2 million tourist arrivals. A new upward target of 4.5million arrivals has been set. Our stocks analyst is optimistic that tourist arrivals will easily surpass this target, especially when Chinese tourists emerge from lockdowns.

Malaysian tourism-related stocks are already performing very well in comparison to to the KLCI, expect better in the coming quarters
The re-opening of international borders should drive investor interest towards cyclical plays, serving as tailwinds for tourism-related stocks. The KLCI’s YTD performance as of 7 July 2022 stands at -9.22%, alongside total returns of -10.85%. The 5 recommended stocks below already achieved +8.22% higher total returns relative to KLCI’s total returns from the border re-opening on 1/4/22 to 7/7/22. In the coming quarters, we expect revenue and profit to accelerate as Chinese tourists emerge from COVID lockdowns. Revenue and profit are likely to peak in Q2 and Q4 due to influx of tourists in the summer break and year-end holidays.

5 Malaysia tourism stocks that our stocks analyst recommends:

KLSE 4715-GENTING MALAYSIA BHD (-2.14% YTD)

Genting Malaysia Berhad operates in two segments- Leisure & Hospitality and Properties. Genting Malaysia has trailing 12-month revenue growth of 64.4% compared to 26.19% for its industry peers. It also has positive YoY revenue growth for the past 2 quarters. Total return YTD is 2.4% compared to -7.1% for FTSE Bursa Malaysia EMAS Index.

KLSE 5238-AIRASIA X BHD (-22.31% YTD)

AirAsia X Berhad engages in the provision of long-haul, low-cost air transportation services. It operates primarily in the Asia-Pacific region and derives revenue via freight services, aircraft operating lease income, management fees and others。 Revenues from Air Freight rose 516% YoY in Q1 2022 and now account for 72.1% of revenue vs 34.4% a year before.

KLSE 4847-KONSORTIUM TRANSNASIONAL BHD (-10.00% YTD)

Konsortium Transnasional Berhad is an investment holding company that operates public bus transport services, ticketing services, and trading services. Konsortium also operates in imports and distributes bus parts, machines, and four- wheeled vehicles.The firm’s revenue has grown for 4 consecutive quarters. Revenues from Bus Transportation rose 185% YoY in Q1 2022.

KLSE 5517-SHANGRI-LA (MALAYSIA) HOTELS BHD (-0.60% YTD)

Shangri-La Hotels Malaysia Berhad is an investment holding company that operates hotels, beach resorts, property management, investment and commercial laundry. Its segments are hotels, gold courses, resorts, and Investment properties. Revenues from hotel, resorts, and golf courses rose 201.4% YoY in Q1 2022 from the year before.

KLSE 5196-BERJAYA FOOD BHD (+89.77% YTD)

Berjaya Food Berhad is an investment holding company that engages in the development and operations of restaurant/cafe chains and retail outlets in Malaysia. Its subsidiary businesses include Kenny Rogers Roasters, Starbucks Coffee, and Jollibean Foods. The company has outperformed its peers, with total return of 112.6% over the past year against -4.6% for FTSE Bursa Malaysia EMAS Index. It also has a higher consensus 3-year estimated EPS CAGR of 31.8% compared to -5.9% Comps Average. (Source: Bloomberg)

Our top pick:

Our top pick among the 5 recommended stocks is Genting. Genting Malaysia looks to be in for a brighter 2H as it should be one of the biggest beneficiaries of the re-opening of borders and a potential revival of China’s tourism sector due to easing COVID restrictions. Visitations to Genting should increase, driven by pent-up travel demand, a weakening ringgit, and the opening of the SkyWorlds theme park which is expected to increase footfall that will spill over to other venues.

Upturn for Malaysia stocks in general; other sectors to also ride on the recovery of Malaysia tourism

As a result of increased tourism, stocks related to highway and toll concessions should benefit from increased traffic and vehicle flows via public buses, tour buses, private vehicles, or motorists. Example of such stocks include Lingkaran Trans Kota Holdings, WCE Holdings and IJM Corp.

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