KUALA LUMPUR (March 24): AllianceDBS Research has upgraded AirAsia Bhd to “Buy’ (from Hold) at RM2.18 with an unchanged target price of RM2.60 and said the low cost carrier’s recent share price correction was overdone.

In a note Tuesday, the research house said it expects fuel cost savings to be more apparent in FY15F, given the lower average hedged costs.

AllianceDBS Research said AirAsia's share price had fallen by 26% from the peak in Dec 2014, due to the QZ8501 accident, stronger US Dollar, and the launch of flymojo.

It said while these concerns were valid, the market may have overly punished the stock, as its valuation remain decent at 7.1x FY15F PE.

“Our target price is derived by applying a 45% discount to our SOP value.

“There are concerns that Indonesia AirAsia's woes may be a drag on the group, but we think the current share price has provided a sufficient margin of safety, as our target price implies a complete write-off of IAA’s related assets (receivables due, equity, etc),” it said.