Analysts see strong fundamentals supporting AirAsia shares despite downed plane

-A +A

KUALA LUMPUR (Dec 30): Low-cost carrier AirAsia Bhd has sufficiently strong fundamentals which will enable it to sustain investor’s confidence despite the adversity posed by the crash of its affiliate AirAsia Indonesia’s flight SQ8501, say aviation analysts.

The airline’s stock was sold down in active trade on Monday following news of the aircraft disappearance, but AirAsia gained marginally in morning trade today to a high of RM2.75 from RM2.74 but gave in the gain to settle at RM2.74 as at 12 pm.

The counter was actively traded with some 4.5 million shares changing hand.

Meanwhile, AirAsia X Bhd’s share price remained unchanged at 65 sen, with 1.12 million shares done.

Maybank Investment Bank aviation analyst Mohshin Aziz said the recovery was due to the element of correction yesterday after Monday's sharp fall.

AirAsia share price plunged 8.5% which caused the airline to lose about RM700 million in market capitalisation on Monday after its flight QZ8501 disappeared on Sunday morning.

The Indonesian Authorities have discovered debris of the plane and several bodies near the search and rescue location in Belitung yesterday.

In light of the latest development, Mohshin believed that investors would regain their confidence in the low cost carrier as the company has strong fundamentals.

“The fundamental of AirAsia is very strong and the Indonesian plane incident is an accident. Any airline in the world is subject to similar risk.

“Apart from that, people looked at what they do, in terms of proper training, proper code of conduct. In handling the situation, they are doing what they can,” Mohshin told Theedgemarkets.com.

He is confident that investors' confidence will recover from the incident.

Goh Kay Chong, remisier from TA Securities held a similar view that AirAsia’s management is intact and “it is still a good company.”

He pointed out that the recovery since yesterday was mainly due to institutional buyers entering the market to support the price.

“There is an oversold situation because of the Indonesian plane, that’s why on Monday many people were panic selling, which pushed the price down.
 
"But, later on, some institutional buyers came in and that supported the price,” Goh said, adding that the slight recovery today could be for the same reason.

He believed that AirAsia’s share price would stabilise in near term.

“Considering that crude oil prices are still coming down, this is good news for AirAsia as they can save on the fuel cost,” he added.

The Brent crude oil price has again slipped 0.76% to US457.46, while WTI crude oil dipped 0.65% to US$53.77 as at 12.27 pm.