PETALING JAYA: The “recovery theme” projected for the travel and hospitality sector, which grappled with the impact of Covid-19 last year, remains intact as these stocks have outperformed the market in 2021 despite poor results performance.
TA Securities pointed out that the earnings weakness in 2020 has not stopped share prices from recovering, indicating that the market has looked beyond the threat of the pandemic, as travel and hospitality stocks have mostly outperformed the market on a year-to-date (YTD) basis.
“For the stocks under our coverage, Genting, Genting Malaysia, AirAsia and Malaysia Airports Holdings (MAHB) have surged 12.9, 10.4%, 2.8% and 1.4% YTD respectively and outperformed the FBM KLCI, which contracted by 1.2% YTD,” said the research house in a report.
For Q4’20, TA Securities highlighted that earnings indicated a lacklustre quarter-on-quarter (q-o-q) recovery, although Resorts World Genting has reopened in June-July 2020, and AirAsia has resumed its domestic operations in April 2020, due to the reinforcement of conditional MCO during the quarter.
For Genting, it stated that the impact is less severe as it is underpinned by steady recovery in Resorts World Sentosa’s earnings since reopening on July 1, 2020 and higher contribution from the plantation unit.
Based on the results conference calls, the research house summarised that the companies’ management is cautiously optimistic on this year’s outlook, which is still full of uncertainty.
“We can expect another lacklustre performance in 2021 where the earnings recovery would tend to be rocky and slow, depending on local Covid-19 cases and state of MCO in the country.”
However, it cautioned investors that they should not be distracted by the poor 2021 corporate earnings from travel and hospitality companies that management have forewarned and should stay invested this year.
On the whole, TA Securities maintained its overweight call on the travel and hospitality sector, with buy calls for AirAsia, MAHB, Genting and Genting Malaysia.
It expects border reopening to likely be in end-2021 or early-2022 when Malaysia achieves herd immunity against the pandemic.
“All in all, we believe the price recovery is not over yet and look forward to a second leg in Q4’21-Q1’22 when Malaysia achieves herd immunity and borders reopened for mass travelling.”
Source: The Sun Daily
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