Friday 29 Mar 2024
By
main news image

KUALA LUMPUR: AirAsia Bhd, whose share price has rebounded 76.9% from a six-year low of 78 sen on Aug 26, still has upside potential, analysts said, citing the low jet fuel prices and the budget airline’s plans to turn around its Indonesian and Philippine units as among the key catalysts of the stock.

AirAsia (fundamental: 0.2; valuation: 1.2) shares closed seven sen or 5.34% higher at RM1.38 yesterday, with 95.87 million shares changing hands, making it the most actively traded counter on Bursa Malaysia. 

Warrants of AirAsia — AirAsia C25 and AirAsiaC23 — were also actively traded, climbing 5.5 sen or 22.92% and 1.5 sen or 50% respectively. 

Its long-haul arm, AirAsia X Bhd’s (fundamental: 0.2; valuation: 0.3) stock also drew investor interest, gaining one sen or 4.76% to close at 22 sen.

AirAsia shares started sliding in June after Hong Kong-based GMT Research issued a report that questioned the low-cost carrier’s books. This was further pulled down by concerns regarding its Indonesian affiliate in July, after the Indonesian authority warned that PT Indonesia AirAsia could be grounded for a lack of funds.

Year-to-date, AirAsia has shed RM3.73 billion or 49.26% from RM7.57 billion on Dec 31, 2014 to RM3.84 billion yesterday, underperforming the FBM KLCI’s 6.91% decline.

However, investors have started to turn bullish on the stock, with 24 research firms predicting a 29.95% upside based on the average target price of RM1.97 apiece, according to Bloomberg data. 

“I think the excessive sell-off [of AirAsia shares] is over and its recent recovery is within the market’s expectation,” TA Securities Research analyst Tan Kam Meng told The Edge Financial Daily over the phone, adding that the stock should gradually recover to its fundamental value. 

He also noted AirAsia’s foreign shareholdings dropped to 48% as at end of August compared with 60% a year ago, mainly due to the decline in the ringgit against the US dollar. 

Tan is of the view that the foreign shareholdings are unlikely to decrease further based on the current US dollar/ringgit exchange rate. Yesterday, the ringgit weakened by 1.8% to close at 4.2720 against the greenback.

Tan is reiterating a “buy” call on AirAsia with a target price of RM1.68, expecting the airline’s fundamentals to be stronger than before, underpinned by lower fuel price and lessening competition.

“As such, we see the current price weakness as a good opportunity to accumulate [AirAsia shares],” he added.

Maybank Investment Bank Bhd aviation analyst Mohshin Aziz also sees further upside in AirAsia’s share price, given that the airline has good earnings potential going ahead. 

“I think the share price decline over the past months was overdone and has been priced in. The market is now looking at the positive side of things,” he told The Edge Financial Daily. 

air-asia_chart_fd_220915_theedgemarkets_fb

“We are confident that the outlook for the second half of 2015 and 2016 is positive, given the low fuel price environment and the fact that Malaysia Airlines Bhd (MAB) has cut significant capacity and raised its published fares significantly since August,” said Mohshin. 

“Further, the airline’s proposed share buyback announcement last week is positive on the sentiment,” he added. 

He is keeping his earnings forecasts and fair value of RM2.05 unchanged, which is based on 8 times AirAsia’s FY15 price-earnings ratio (PER). 

PublicInvest said AirAsia is trading at a compelling PER of 4.3 times FY16 earnings, which is at its lowest four-year historical PER.

“This compared to its historical PER of 10 times. 

“We continue to like AirAsia for its solid long-term potential growth prospects, low-cost competitive advantage and network connectivity and synergies within the AirAsia group,” the firm added. 

Kenanga Research analyst Adrian Ng believes that the price recovery will be sustainable for AirAsia, should the yields be maintained at current levels and it benefits from lower jet fuel costs. 

Kenanga Research reiterated its “outperform” “call on the stock with a target price of RM1.86 based on 1.32 times of FY15 price-to-book value. 


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on September 22, 2015.

      Print
      Text Size
      Share