KUALA LUMPUR (May 24): Plunging first quarter net profit saw AirAsia X Bhd's (AAX) share price skids as much as 12.15% as analysts downgraded their ratings on the counter and adjusted their forecasts.

At 10.43am, AAX slipped 6.5 sen to 47 sen with 181.16 million shares done for a market capitalisation of RM1.9 billion. Year to date, the stock has grown 30.56%.

Yesterday, AAX, the long-haul, low-cost affiliate of AirAsia Bhd, saw its net profit fall 94.2% to RM10.34 million for the quarter ended March 31, 2017 (1QFY17) from RM179.49 million on higher operating expenses including fuel prices, which rose to US$66 per barrel compared with US$64 per barrel in 4QFY16.

Quarterly revenue, however, rose 21.6% to RM1.18 billion from RM970.67 million in 1QFY16, on strong passenger numbers, which grew by 33% year-on-year on the back of a 28% year-on-year increase in seat capacity.

Public Investment Bank Bhd downgraded its call to "neutral" as it believes that the positive performance such as better cost efficiencies and improved associates performance have been priced in given the sharp rally in its share price.

“AAX is currently trading at our target price of 53 sen. Hence, we downgrade it to ‘neutral’,” it said in a note today.

Meanwhile, AllianceDBS Research adjusted AAX earnings forecasts based on revisions made on lower yields, stronger ringgit and better efficiency.

For the financial year ending Dec 31, 2017 (FY17), earning was forecast to be 1% lower, followed by 2% higher in FY18, and slipping 3% in FY19.

“Given our minor forecast changes, our target price is maintained at 39 sen, based on 1.3 times of FY17 price to book value. We note that AAX’s sharp price has seen steep gains, implying that its current valuations are not justified by its thinning profitability, in our view. Therefore, we downgrade it to `fully valued’,” it said.

In a note to clients today, AllianceDBS felt that AAX should keep an eye on emerging threats especially towards the second half of 2017.

It felt that the airline would be able to maintain its improved utilisation, though year-on-year available seat kilometres (ASK) growth should taper off as 1QFY17 had the lowest base in FY16.

“Competition and its impact on yields are a key risk to monitor, as we highlight that Malaysia Airlines Bhd is initiating eight new services to China over 2017, which implies some overlap with current AAX services,” it said.

MIDF Research acknowledged the 1QFY17 earnings as a blip but downgraded AAX to neutral with a new target price of 50 sen.

“AAX 1QFY17 core net profit of RM33 million missed both ours and consensus forecasts, representing just 12% of ours and 14% of consensus numbers. We are not too discouraged by the blip in earnings,” MIDF said.

MIDF cut AAX’s earnings forecast for FY17 and FY18 by 15% and 14.5% respectively as it increased its operating expense assumptions.

“We roll-forward our valuation to FY18 earnings per share, pegged to an unchanged forward price-to-earnings ratio of 8.5 times.

“AAX’s share price has gained a healthy return of 48.6% year-to-date, just shy of our previous target price of 56 sen. We believe that AAX is fully valued for now,” it added.