PETALING JAYA: Although aviation counters across the Asean region have seen a jump following the positive headlines over Pfizerâs vaccine success, CGS-CIMB Research opined that it has yet to turn positive on the sector as it sees the market sentiment running too far ahead of fundamentals.
It pointed out that the regionâs best-performing stocks to date, Airports Corporation of Vietnam (ACV) and Airports of Thailand (AOT), were the relative laggards in the recent rally, while the worst-performing stocks rose the most.
âAlthough airline share prices gave up some of their gains yesterday, airport stocks continued their rise, in a classic mean reversion towards cyclicals and industrials, but probably also due to investorsâ fear of missing out (FOMO),â explained the research house in a report.
It listed that for the two Add calls, ACV is still trading below its VND79,400 target, but Malaysia Airports Holdings Bhd (MAHB) has risen above the RM5.14 target, while its Hold calls, Singapore Airlines (SIA) and SATS Ltd is trading higher than the S$3.46 and S$3 target.
On the other hand, the share prices of AOT, AirAsia Group Bhd and AirAsia X have moved against its reduce calls.
CGS-CIMB highlighted that it remains cautious on aviation in general despite the positive vaccine-related news, as it may be difficult for it to be widely available until mid-2021 and the World Health Organisationâs plan is to deliver two million doses by end-2021, which accounts for circa 26% of the 7.8 billion global population today.
The research house pointed out that SIA has guided for an average deployment of 33% of its pre-pandemic capacity for 2021, versus CGS-CIMBâs in-house estimate of 45% for the year ending March 2022.
In regard to valuation expansion despite tough fundamentals, it has applied a 20% discount against MAHBâs sum-of-parts of RM6.43 as a safety net against customer defaults to derive a target price of RM5.14; the discount may not be necessary if risks dissipate.
