Haze winners and losers: Healthcare gains as airlines, tourism feel the heat

KUALA LUMPUR: The worsening haze is beginning to leave its mark on Malaysian firms, creating winners and losers as deteriorating air quality affects consumer behaviour, travel and business operations.

Analysts see healthcare as the clearest potential beneficiary of a prolonged haze episode, alongside stronger demand for air purifiers, while airlines, tourism players and solar operators face the costs of dirtier skies.

Renewable energy players could also see solar generation fall as haze blocks sunlight, although the immediate earnings impact is expected to be limited.

Hong Leong Investment Bank Bhd (HLIB) analysts said the impact is already showing up in healthcare data.

"We favour healthcare providers as the clearest potential beneficiaries, given the direct link between deteriorating air quality and patient volumes," they said in a recent environmental, social and governance note.

Citing recent Health Ministry data, the analysts said asthma cases in heavily affected states including Sarawak, Kedah and Perak surged 259 per cent to 219 from 61 within a week.

Upper respiratory tract infection cases more than doubled to 3,674 from 1,637, an increase of 124 per cent.

The research house said rising patient volumes could put additional pressure on public hospitals and health clinics, potentially pushing some middle- and higher-income patients towards private healthcare providers.

KPJ Healthcare Bhd could be among the beneficiaries given its presence in Sarawak, which has recorded some of the most severe haze levels in recent weeks.

The group operates KPJ Kuching Specialist Hospital, KPJ Sibu Specialist Medical Centre and KPJ Miri Specialist Hospital.

HLIB said the three hospitals "should provide a near-term footfall tailwind" as respiratory and outpatient demand rises in areas most affected by the haze. Still, a major earnings boost seems unlikely.

"Given the relatively low revenue intensity associated with haze-related cases, we do not expect this to be a meaningful earnings re-rating catalyst," the analysts said.

KPJ shares closed at RM2.55 on Sept 18, making the stock 5.2 per cent cheaper than at the start of the year.

Another potential beneficiary is Cuckoo International (MAL) Bhd as worsening air quality raises consumer awareness of indoor air pollution, potentially boosting demand for air purifiers.

HLIB said Cuckoo's rental model could make air purifiers more accessible during prolonged haze, with rental plans ranging from about RM77 to RM143 a month compared with outright prices of RM2,500 to RM4,400 for selected models.

It said the situation could provide a near-term demand catalyst for air purifiers, although the contribution would likely remain modest relative to Cuckoo's broader appliance business.

Cuckoo ended Sept 18 at 37 sen a share, having lost 35.1 per cent of its value this year.

AIRLINES FACE TURBULENCE

On the losing side, airlines are among the businesses most directly exposed as deteriorating visibility can cause delays, cancellations, aircraft holding and diversions.

HLIB singled out AirAsia Group Bhd as facing near-term operational and demand risks, particularly if the haze persists and spreads geographically.

Earlier this month, AirAsia issued travel advisories warning of potential cancellations and cascading delays across East Malaysia and West Kalimantan.

"Beyond the immediate operational impact, a prolonged haze episode could weigh on tourist arrivals and regional travel demand, particularly across AirAsia's Malaysia-Indonesia network," the research house said.

AirAsia shares closed at 53 sen on Sept 18, down 70.4 per cent so far this year.

History shows how quickly severe haze can disrupt aviation.

During the 2015 episode, 59 aircraft were delayed at Kuching International Airport, affecting about 8,000 passengers, while Sultan Abdul Aziz Shah Airport in Subang was shut for nearly three hours when visibility fell below 300 metres.

In 2019, 19 flights were affected at Penang International Airport in a single evening, including four cancellations, eight severe delays and seven diversions or turnbacks, HLIB data showed.

The current episode has also caused disruptions, with two AirBorneo Airways flights at Kuching International Airport cancelled on Sept 2.

Tourism could suffer a knock-on effect even where flights and hotels continue operating, HLIB said.

The haze could lead to booking cancellations and closures of outdoor attractions, while negative headlines and health concerns could discourage travellers from visiting affected destinations.

LESS SUNSHINE, LESS POWER

Solar power producers face another consequence of hazy skies, with less sunlight reaching their photovoltaic (PV) panels.

A study of Malaysian solar installations during the September to October 2015 haze found that PV output fell 17.8 per cent as airborne particles scattered and absorbed incoming sunlight.

But HLIB said the financial impact on listed solar players such as Solarvest Holdings Bhd and Samaiden Group Bhd is expected to remain relatively small for now.

Solarvest had 120.7 megawatt-peak of effective ownership capacity energised in its latest quarter, while Samaiden had more than 10 megawatts.

Electricity sales contributed just 6.2 per cent of Solarvest's latest quarterly revenue and 0.5 per cent of Samaiden's, the research firm said.

In view of this, HLIB expects the near-term earnings impact to remain limited, although prolonged haze during an El Nino-driven dry season could pose a greater risk to generation yields.

Solarvest shares closed at RM3.33 on Sept 18, up 6.7 per cent so far this year, while Samaiden gained 40.3 per cent to RM1.95.

THE WIDER BILL

Beyond individual companies, the haze could leave a much larger bill for the economy, the research firm said.

Agriculture faces lower crop yields as haze reduces light intensity and interferes with plant gas exchange, while extreme heat and erratic rainfall associated with El Nino could compound the impact.

HLIB said acute drought conditions during the 2024 El Nino caused yield losses of up to 30 per cent, while prolonged climate-driven supply shocks could add to food inflation.

Businesses could also face higher absenteeism and lost workdays, while extremely poor air quality could curtail outdoor-intensive activities.

The healthcare cost is significant too. HLIB cited an estimate that illnesses associated with the 2013 haze cost RM410.6 million.

The stakes could rise if the current episode lasts longer than usual.

Prolonged dry conditions and the high probability of a very strong El Nino could potentially extend the haze season into late October or early November, compared with late September or early October under normal weather patterns.

HLIB said the key variable would be whether the episode remains short-lived or extends into the fourth-quarter dry season.