AirAsia expected to declare special dividend — TA Securities

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KUALA LUMPUR (May 9): AirAsia Group Bhd is expected to declare total dividends of 70 sen a share in 2019, assuming the budget airline announces another round of special dividend this year, says TA Securities Holdings Bhd today.

TA Securities analyst Tan Kam Meng said in a note today that TA Securities raised its AirAsia Group dividend projection to 70 sen a share for financial year ending Dec 31, 2019 (FY19) from eight sen previously.

According to Tan, TA Securities also upped its AirAsia Group earnings forecast besides the stock's target price and recommendation.

"We raise our FY19-20 earnings projections by 5.1% and 7.5% to RM679 million and RM954.6 million respectively, after factoring in: 1) lower jet fuel price of US$80/b (from US$85 previously); 2) stronger ringgit at an average of USDMYR4.10 (USDMYR4.15 previously) in 2019 and 2020; and 3) completion of the disposal of 25 aircraft to Castlelake for US$768 million."

"With the change in earnings (forecast), we raise AirAsia Group's target price to RM3.42/share (from RM2.65 previously) based on revised 12x CY20 (calendar year 2020) EPS (earnings per share). We raise the valuation PE (price-earnings ratio) by 2 multiples to factor in our bullish stance on AirAsia Group's digital platform. We upgrade AirAsia Group to Buy (from sell) with a huge total return of 60.5%," he said.

At Bursa Malaysia today, AirAsia Group shares settled at RM2.57 at 12:30pm. At current levels, Tan said the airline's stock price has fallen as much as 15% after the release of its 4QFY18 results.

"We view this as a great entry level to take position in AirAsia Group for its digital business and potential special dividend for FY19," he said.

Citing AirAsia Group, the analyst said the company indicated that its digital business is expected to break-even in its first day of operations.

He said: "Having said that, it is too early to factor in significant contribution from the digital business at this juncture as most players in the market are still loss-making."