SINAPORE (Apr 15): For the period from January to February, Singapore visitor arrivals grew 2% y-o-y, continuing the growth slowdown trend, as the arrivals increased by 2.4% in 4Q18.

China and Asean arrivals were flat for Jan-Feb 2019, with China tourist arrivals seeing an improvement from the 3.7% decline in 4Q18, while Asean bloc was flat y-o-y driven by 2.3%/5.8%/2.1% declines from Indonesia/Thailand/ Vietnam arrivals offsetting growth from Malaysia, Philippines and smaller markets.

In a Monday report, Maybank Kim Eng analyst Neel Sinha says, “Our 2019 outlook for overall visitor arrival growth is about 3% and Changi passenger movement about 4% y-o-y.”

This was fortunately compensated by a strong showing from US and Europe, which accounted for about 20% of total visitors. American visitors increased by 7.2%, while European visitors increased by 7.8%.

“Also noteworthy is that UK, the largest component of European arrivals, grew 11.3% y-o-y (signs of early mover Brexiters?),” says Sinha.

Nonetheless, Maybank Kim Eng remains “positive” on the Singapore aviation services sector for the coming three to five years.

It has “buy” calls on all three stocks in the sector: SATS, SIA Engineering and ST Engineering.

IATA, industry consultants and major OEMs (Airbus, Boeing) estimate global commercial aircraft fleet growth at about 3-4% CAGR (about 4.5- 5% for Asia Pacific) over the next decade with services growth tracking similar levels. Development of airport infrastructure in APAC secondary and tertiary cities, rising affordability, growth in low cost carrier fleets and rising passport penetration, currently just at single-digit levels in populous countries of China, Indonesia and India are expected to be the key drivers of this expanding market.

As at 12.10pm, shares in SATS, SIA Engineering and ST Engineering are trading at $5.29, $2.49 and $3.83, respectively.