AirAsia X down 2.08% as PublicInvest cuts earnings forecast, target price

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KUALA LUMPUR (Oct 24): Low-cost carrier AirAsia X Bhd was among the top-active counters in early trade this morning and was down as much as 2.08% after PublicInvest Research downgraded its earnings forecast for the group.

At 9.24am, the counter was half a sen or 2.08% lower at 23.5 sen, with 1.13 million shares traded, giving it a market capitalisation of RM995.56 million.

PublicInvest Research analyst Nur Farah Syifaa' said in a note today the research house revised its earnings forecast downward amid lower average fare expectations and rising fuel costs.

"We impute higher fuel price assumptions to US$85 per barrel from US$75 to US$80/bbl previously. These reduce our earnings by an average of 73% for financial year ending Dec 31, 2018 (FY18) to FY20," said Nur Farah.

Additionally, Nur Farah said the management decided to suspend the scheduled flights in Indonesia (IAAX) due to the challenging operational environment. Currently, it has two aircrafts in its fleet, one of which will be returned to Malaysia (MAAX), while the other will remain in IAAX to serve for Umrah charter (Jakarta-Jeddah), she added.

Despite maintaining a neutral call on the stock, Nur Farah has reduced its target price to 23 sen, from the 35 sen previously, based on a 10 times multiple (8 times previously) to FY19 earnings per share (EPS), the multiple in line with regional low cost carrier averages.

Nur Farah also noted that the challenging FY18 will be due to the current fuel price environment and weakening ringgit.