AirAsia Group descends as 1H profit trails forecast

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KUALA LUMPUR (Aug 29): AirAsia Group Bhd's share price fell as much as nine sen or 5% to RM1.71 so far today after the budget airline reported first-half profit, which was below analysts' forecast.

At 12:04pm today, AirAsia Group shares were traded at RM1.75 with 9.77 million units transacted.

Yesterday, AirAsia Group said net profit fell to RM17.94 million in the second quarter ended June 30, 2019 (2QFY19) from RM361.81 million a year earlier, while loss before tax stood at RM202.47 million versus a net profit of RM275.01 million.

1HFY19 cumulative net profit was lower at RM110.2 million compared to RM1.5 billion a year earlier, it said.

Today, Maybank Investment Bank Bhd (Maybank IB) analyst Mohshin Aziz wrote in a note that AirAsia Group's 1H19 core net profit of RM21 million constituted only 5% of Maybank IB's full-year forecast. Maybank IB's FY19 forecast for AirAsia Group was the second lowest on the street and "needless to say consensus (forecast) will be revised down".

He said Maybank IB, which had cut its AirAsia Group share target price to RM1.56 from RM1.92, has also downgraded the stock to sell from hold.

"AirAsia Group's 2QFY19 losses are atypical as 2Q is seasonally the second strongest quarter of the year. Yields held up y-o-y, but costs soared due to higher maintenance provisions and share of associate losses that was previously not recognised. These aside, the underlying performance is weaker than our expectation and it's unlikely to improve anytime soon.

"The current competitive environment is brutal and there is no clarity when the situation will improve. We advocate selling as there is further downside risk to earnings amid the very weak fundamental outlook," Mohshin said.

Read also: AirAsia Group is in it for the long haul: TA Securities