Tourism sector
Visitor arrivals in October 2016 grew 12% year-on-year (y-o-y), bringing total 10-month arrivals to a 4.4% increase. The largest percentage growth in visitor arrivals in October came from China at a 48% increase compared with the same month in the previous year. In the first 10 months of 2016, China tourist arrivals grew a strong 27% y-o-y compared with a 4.3% increase in 2015.

We are bullish going into 2017 given the weaker ringgit coupled with ongoing promotional efforts by the government and airlines. Malaysia Airlines, AirAsia, AirAsia X, Genting Malaysia Bhd (and Genting Bhd indirectly) are among the direct beneficiaries of the positive growth in tourist arrivals. Malaysia Airlines, AirAsia, Genting Malaysia and Genting are our existing buys.

October 2016 visitor arrivals, up 12% y-o-y to 2.3 million, was the second-highest monthly y-o-y growth in 2016. Growth was driven by visitors from China with a 48% growth, Brunei at 38%, Indonesia with 31%, Thailand with 24% and Singapore with a 11% growth. The surge in Chinese visitor arrivals was consistent with reports from Travel Sky China that outbound tourism from China to Malaysia during Golden Week 2016 (Oct 1 to 7) surged 52% y-o-y.

We understand that more Chinese preferred to visit Malaysia after Thailand banned low-cost tours in September 2016. Note also that Singapore visitor arrivals growth of 11% in October 2016 was the second-highest monthly y-o-y growth in 2016. We understand more Singaporeans visited Malaysia to capitalise on the weak ringgit.

Going into 2017, ForwardKeys noted that outbound air travel bookings from China to Malaysia from Jan 18 to Feb 1 again surged 46% y-o-y. In 2017, the e-visa scheme will also be extended to visitors from other South Asian (except India, Nepal and Pakistan) and Balkan countries.

The Malaysian government has recently gazetted only four standard sales periods: New Year Sale (March 1 to March 30), Mega Carnival Sale (June 15 to Aug 31), Year End Sale (Nov 1 to Dec 31) and another to be jointly set by traders. This will enable tour packages to be planned to coincide with the periods. Inbound tourism accounts for 12% of consumer spending and 6% of gross domestic product.

Already, there has been a surge in credit card spending by “foreign cardholders” in Malaysia, which grew 21% in November last year. Beneficiaries of higher tourist arrivals are the aviation (airlines, airports), hospitality (hotels, theme parks, casinos) and consumer (retail, food and beverages) sectors. Public listed companies offering a direct exposure are Malaysia Airlines, AirAsia, AirAsia X, Genting Malaysia, Atlan, Only World Group, Shangri-La, Yong Tai and Landmarks. Also, real estate investment trusts with hotels and/or shopping mall assets like Pavillion REIT, KLCCP, IGB REIT, Sunway REIT, CMMT, Al-Salam REIT could see a rise in hotel occupancy rates, shopper traffic and mall tenant sales. — Maybank IB Research, Jan 18