Malaysia Tourism Report Q3 2010 - New Market Report Published

Core Forecasts ; We remain bullish about the long-term prospects for Malaysian tourism, which continues to benefit from strong government support and a relatively secure and stable political situation. The country offers a range of tourism options, from meetings, incentives, conferences and events (MICE) travel to beach holidays, and the government is committed to supporting an industry that is an important generator of foreign exchange. For 2010, we forecast tourist arrivals to exceed 25.26mn, a rise of 7% year on year (yo- y). This is largely in line with the rate of growth in visitor arrivals for the first three months of the year. Malaysia received 5.75mn tourists in January-March 2010, up by 5% from the 5.46mn received in the same period of 2009, according to figures released by the Ministry of Tourism in May 2010. Following the release of these figures, the ministry secretary-general Ong Hong Peng said that it expects tourism arrivals to reach 24mn for 2010 as a whole, while revenues from tourism are forecast by the authorities to reach MYR56-57bn. These figures are less bullish than our own forecasts and would appear to represent a continuation of the forecasting caution displayed by the Ministry of Tourism in 2009.

Despite the ministry's short-term cautiousness, other branches of government are ambitious about the long-term. The 10th Malaysia Plan, tabled in parliament in June 2010, aims for substantial expansion in the size of the country's tourism industry over the next five years. The plan targets an increase in the size of the sector's contribution by a factor of 2.1 by 2015, which would take annual tourism receipts to MYR115bn and generate about 2mn jobs. This would take Malaysia into the world's top 10 national tourism earners, up from 16th in 2008, when the country received 2% of global tourism receipts, according to the plan. In order to achieve these targets, the 10th Malaysia Plan emphasises attracting more of the high net worth market, particularly wealthy travellers from emerging markets, with a focus on China, India, Russia and Arab countries. We believe these long-term targets are a little too ambitious, on the basis of our five-year forecast trajectory.

Company Analysis
Q110 was a largely positive quarter for leading travel and tourism companies in Malaysia. Malaysia Airlines generated net profit of MYR310mn, compared to a net loss of nearly MYR700mn in Q109. Genting Malaysia generated a net profit of MYR232.4mn in the quarter, a rise of 9% y-o-y, with Resorts World Genting complex contributing positively to the performance of the parent company.

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