Transport sector to gain from China tourist arrivals

PETALING JAYA: AmInvestment Bank Bhd maintains its “overweight” call on the transport and logistics sector on expectations the Chinese New Year and Spring Festival in China will likely to boost inbound tourists to Malaysia.

The research house noted the Spring Festival would provide the much-needed boost for travel in China with the daily average number of international passenger clearances expected to reach 1.8 million people.

Last year saw a recovery in China’s tourism activities with the number of total inbound and outbound tourists exceeding 190 million.

“For 2024, the China Tourism Academy expects total inbound and outbound tourist numbers to recover further to 260 million,” it noted.

The research house added the visa-free implementation is expected to spur China’s tourism rebound.

“Malaysia saw a 35% year-on-year increase in China tourist arrivals in December 2023.

“We gather that both governments are currently discussing extension of the waiver beyond November, which appears likely as Malaysians made up the largest group of inbound tourism in China during the same period, according to China’s National Immigration Administration,” the research house noted in a report.

Additionally, AmInvestment Bank pointed out that there were encouraging signs on capacity growth to China from the third quarter of 2023 according to a brief with Malaysia Airports Holdings Bhd (MAHB), as filled seat capacity recovered to 45% of pre-pandemic levels.

“Moving forward, we gather that China-related routes including those to Hong Kong and Shanghai to see the largest increases in capacity for 2024,” the research house said.

New routes such as Loongair’s Kuala Lumpur to Hangzhou, China Eastern Airlines’ Kuala Lumpur to Nanjing and AirAsia X’s Kuala Lumpur to Xian are expected to contribute to an increase in travellers.

AmInvestment Bank has a “buy” call for MAHB with a fair value (FV) of RM8.07 a share and Perak Transit Bhd (FV: RM1.49) as its top picks for the transportation and logistics sector.

According to the reseach house, MAHB is likely to benefit from the recovery in aviation surpassing the pre-pandemic levels because of stronger government-policy support, and the ramping up of international air travel capacity including firm demand from niche sub-sectors such as medical tourism.

According to the research house, Perak Transit offers a strong opportunity for investors to own a defensive public infrastructural business.

Investors will be able to capitalise on resilient growth from steady improvement in occupancy rates and improving footfall at its Terminal Meru Raya and Kampar Putra Sentral.

The company is expecting to start earning revenue from Terminal Bidor Sentral in the first half of fiscal year 2024, according to the research house.

“Within the sustainability space, Perak Transit is gradually making headways with carbon reduction efforts by increasing the adoption of solar energy,” said the research house.

It is also transitioning its current fleet of diesel-fuelled buses to electric models over the coming years, the research house added.