KUALA LUMPUR (May 17): MIDF Research has revised AirAsia X Bhd’s (AAX) target price downward to 22 sen from 27 sen previously, following an adjustment in its earnings’ prospects.

However, the research house maintained a “neutral” call on AAX.

It also revised the airline company’s earnings forecast for financial years 2019-2020 (FY19-FY20) to RM68.7 million and RM74.4 million respectively, on higher financing costs following the adoption of the Malaysian Financial Reporting Standards 16 and increased maintenance and overhaul expenses amidst an aging fleet.

“We maintain our view of AAX’s ability to record a profit for FY19. This could be possible through various cost reduction initiatives and better capacity utilisation.

“We opine that passenger growth in Malaysia would remain intact despite the outbound levy, which is expected to take effect in August 2019,” it said in a note today.

MIDF Research also said there was a possibility that consumers would shift from a pricier full service carrier to a low cost carrier such as AAX, especially if similar destinations were offered.

 Moving forward, it opined that the decline in available seat kilometers (ASK) and revenue passenger kilometers (RPK) would be short lived, as the termination of non-core routes would enable AAX to redeploy capacity into main markets in greater China, Japan, India and South Korea.

“The main routes under focus are Taipei-Osaka which has seen a strong load factor since its commencement in January this year and Kuala Lumpur - Fukuoka, which will enhance brand presence before the Tokyo 2020 Olympics.

“With no planned addition of aircraft for AirAsia X Malaysia, AAX would be able to maximise aircraft utilisation when new routes in the said markets are launched in second half FY19,” it added.

At 11.40 am, AAX shares rose half-a-sen to 23 sen with 20.15 million transacted.

Yesterday, the airline company announced a higher net profit of RM43.33 million for the first quarter ended March 31, 2019  from RM41.50 million recorded in the same period last year.

However, revenue was lower at RM1.17 billion versus RM1.27 billion previously, due to a five per cent year-on-year decline in the number of passengers to 1.51 million from 1.58 million.