KUALA LUMPUR (Nov 23): Analysts on Tuesday (Nov 23) cut their earnings forecasts for AirAsia Group Bhd after the airline’s third quarter ended Sept 30, 2021 (3QFY21) results came in below their expectations.
Kenanga Research analyst Raymond Choo said in a note on Tuesday that AirAsia's results came in below his expectations due to lower-than-expected passengers and higher-than-expected losses from its digital businesses.
This prompted him to cut his FY21 earnings estimate for AirAsia by 17% to a net loss of RM2.41 billion.
He reiterated "underperform" on the counter with an unchanged target price (TP) of 70 sen.
According to Choo, AirAsia’s longer-term fortune rests on how successfully it can turn around and transform itself into a digital travel and lifestyle company.
“Faced with negative operating cash flow and negative equity — book value per share projected at -RM0.87 — it is urgently resolving its liquidity and capital adequacy issues via cash calls, which we believe will not be the last,” he said.
AirAsia said on Monday its net loss for 3QFY21 expanded 4.1% to RM887 million from RM851.78 million a year ago, while revenue fell 36.9% to RM295.89 million from RM468.94 million.
The net loss was due to the Malaysian and Indonesian markets that continued to face travel restrictions amid Covid-19 containment efforts, its investment in technology, talent and network as it continued to scale up its digital Super App and its air cargo division Teleport.
For the cumulative nine months ended Sept 30, 2021, its net loss narrowed to RM2.23 billion from RM2.66 billion, while revenue fell 65.77% to RM1.02 billion from RM2.97 billion.
Affin Hwang Investment Bank analyst Isaac Chow also said AirAsia's results were disappointing due to weak aviation revenue and steeper-than-expected losses from its digital businesses.
He cut his earnings forecasts, expecting AirAsia to report larger net losses of RM2.5 billion and RM303 million for FY21 and FY22, from net losses of RM2.1 billion and RM157 million respectively, after incorporating lower aviation revenue and higher losses from its digital businesses.
“In tandem, we lower our TP to RM1.15 (from RM1.60) based on an unchanged 7.5 times 2022 estimated enterprise value-to-earnings before interest, taxes, depreciation and amortisation (EV/EBITDA) ratio,” he said.
Chow, however, maintained his "buy" call on AirAsia as he anticipates an improvement in the aviation market outlook and positive progress in AirAsia’s fundraising initiatives to lead to a rerating.
He also expects AirAsia to have sufficient liquidity in 2021 and 2022.
Meanwhile, UOB Kay Hian analyst Jack Goh said AirAsia posted a lacklustre set of results for 3QFY21 as flights were temporarily hibernated for the most part of the quarter across all its operating countries.
He also raised his full FY21 loss estimate for AirAsia by 19% to RM2.37 billion, following continued travel restrictions amid Covid-19 infections.
“Positively, we believe that the worst is likely to be over for the carrier after having garnered sufficient cash flow through various funding exercises, and with the region’s stellar vaccination milestones, easing of travel restrictions and resumption of flights boosting a meaningful recovery from 4QFY21,” he said.
He upgraded AirAsia to "hold" and revised up his TP to 92 sen from 54 sen.
At the noon break, AirAsia settled three sen or 2.91% lower at RM1, valuing the group at RM4.01 billion.
The counter, which was among the most actively traded stocks on Tuesday morning, saw 22.12 million shares traded.
Year to date, the counter had risen 14.94%.