Aviation stocks take flight on Covid-19 vaccine news

Aviation stocks take flight on Covid-19 vaccine news
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KUALA LUMPUR (Nov 10): Aviation counters on Bursa Malaysia have taken flight this morning amid rising hope that a Covid-19 vaccine will be widely available next year and that air travel will start sooner than later. 

As at 11.15am, mid-haul carrier AirAsia X Bhd (AAX), which is in the midst of restructuring its liabilities to revive financial health, was the second most actively traded stock on Bursa Malaysia. Its trading volume swelled to 342.33 million — one of the highest levels this year. The penny stock gained 2.5 sen at 6.5 sen, yielding a market capitalisation of RM269.63 million.

AAX’s substantial shareholder AirAsia Group Bhd is also actively traded this morning. AirAsia shares were the seventh most actively traded counter on the local bourse with 79.83 million shares. 

The low-cost carrier shot up 11 sen or 20.56% at 64.5 sen. It hit a high of 73 sen shortly after the opening bell. 

Airport operator Malaysia Airports Holdings Bhd (MAHB) jumped 75 sen or 17.3% to RM5.85; at this level, it is valued at RM8.38 billion. It saw 2.88 million shares traded today.

In a note this morning, AmInvestment Bank Research upgraded AirAsia to a “trading buy” from a “sell” call, while also raising its target price (TP) on the group to 68 sen, from 44 sen previously on a 10 times forecasted financial year ended Dec 31, 2022 (FY22) earnings per share (EPS), from 6.5 times FY22 EPS to reflect the more positive outlook for the airline industry following the emergence of a highly effective Covid-19 vaccine.

“At 10 times [price-earnings (PE) ratio], we value AirAsia at a discount to its global peers, Ryanair (27 times forward PE) and Southwest Airlines (14 times forward PE) to reflect AirAsia’s relatively smaller size.

"Nonetheless, we do not rate AirAsia as an outright 'buy' as we are mindful of the urgent need for airlines, including AirAsia, to recapitalise their balance sheets on the massive losses they have suffered amidst a collapse in air travel since the pandemic. We caution on a potential steep downwards adjustment to AirAsia’s share price in the event of a highly dilutive equity-raising exercise,” it noted.

Pfizer’s announcement that its Covid-19 vaccine candidate has an efficacy rate of more than 90% with no major side effects comes as the welcome relief for the global aviation industry, which has been hit by the collapse in air travel following the lockdowns implemented worldwide in order to combat Covid-19.

Kathy Fong