AirAsia stocks active, down on challenging outlook

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KUALA LUMPUR (Aug 24): Shares of AirAsia X Bhd (AAX) and AirAsia Bhd fell in active trade this morning on the possible challenges ahead for the low cost carrier group.

At 9.25am, AAX lost 9.78% or 4.5 sen to 41.5 sen with 64.35 million shares done while AirAsia fell 2.8% or 9 sen to RM3.13 with 5.59 million shares done.

AAX reported a net profit of RM1.02 million for the second quarter ended June 30, 2016 (2QFY16) — its third consecutive quarter in the black. This time last year, it made a net loss of RM132.94 million a year ago.

This was due to higher revenue, which grew by 35.2% to RM883.16 million in 2QFY16, from RM653.03 million last year. It also attributed the profitability to lower fuel cost, AAX said in its Bursa Malaysia filing yesterday.

CIMB IB Research in a note today maintained its “Reduce” rating on AAX with a higher target price of 21 sen (from 17 sen) and said AAX did very well during 2Q16, delivering essentially breakeven results in one of its seasonally-weakest quarters, which was not totally unexpected after its strong 1Q.

“Our Reduce call reflects our misgivings on the competitive environment; our target price has been raised after the EPS upgrades, still based on 1x CY16 P/BV,” it said.

CIMB Research analyst Raymond Yap said industry risks escalate from 2H16 and that momentum could weaken from here onwards.

“Also, AAX is planning capacity growth of 40% yoy in 2H16, from just 12% in 1H, which may require promotional pricing and result in short-term losses.

“AAX surprised us on the upside during 1H16, but it may be hard to sustain the same momentum into 2H16,” he said.