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AirAsia Bhd
(July 13, RM1.33)
Maintain buy with an unchanged target price (TP) of RM3.11:
Last Friday, Bali, Indonesia was shocked by ash spewing from Mount Raung located at the eastern end of the island of Java, which prompted the local government to close four airports in the region for safety purposes. The affected airports were in Denpasar, Lombok, Banyuwangi and Jember. 

Some notable affected airlines that service flights to Bali are Jetstar, Virgin Australia, Indo AirAsia and Indo AirAsia X. However, the airports are able to recommence from time to time depending on Mount Raung’s condition, hence airlines are still servicing their customers if the condition permits them. 

As of Sunday afternoon, the local government gave airlines the green light to continue services, while still maintaining a high alert on the volcano’s activities.

We would not be overly concerned unless the situation persists, which will result in PT Indonesia AirAsia losing Indonesian travellers during the Aidil Fitri holiday in a weeks’ time, as well as travellers from Australia (Bali is Australian hotspot during winter season). We maintain “buy” and a TP based on an unchanged 10% discount to sum-of-parts. — Hong Leong Investment Bank Research, July 13

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This article first appeared in The Edge Financial Daily, on July 14, 2015.

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