Sector Update
We believe the sector is poised for improved prospects in 2010 in line with the recovery in the global economy, but not without some speed bumps along the way.
IATA expects traffic growth rates for both passenger and cargo already bottomed in 2009 and they will return to the growth path from 2010.
While petroleum tanker freight rates are unlikely to revisit the lows in 2009, they are generally expected to remain relatively subdued in 2010.
FY10-11 net profit forecasts of AirAsia and MAS are raised by 13-26% largely to reflect better yields.
Upgrade the transportation sector to Neutral from Underweight. AirAsia’s fair value is raised by 14% to RM1.40 and our call is upgraded to Market Perform from underperform. MAS’s fair value is raised by 26% to RM1.96, while call is maintained at Underperform. MISC’s fair value is raised by 15% to RM8.95 and our call is upgraded to Market Perform from underperform.
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