KUALA LUMPUR (Aug 21): Maybank Investment Bank Bhd said AirAsia X Bhd (AAX) is likely to report this month a core net loss of RM105 million for the second quarter ended June 30, 2019 (2QFY19) due to a seasonally weak quarter amid a weak-yield environment.

Maybank analyst Mohshin Aziz wrote in a note the 2QFY19 figures could bring the budget long-haul airline's 1HFY19 core net loss to RM135 million.

"We forecast the upcoming 2Q19 results will deliver a big loss as it is a seasonally weak quarter, compounded by a weak yield environment. The outlook is also weak, the new departure levy (from Sept 1) and possible reimbursement of PSC (passenger service charge) shortfall might deplete cash on the balance sheet and increase debt more than we expect.

"2Q19 load factor declined by 1.4ppt year-on-year (y-o-y) to 80.2% despite a capacity decrease of 5.7% y-o-y. This shows that market demand is soft and yields will likely continue to be negative. Yield declined by 2% y-o-y in 1Q19 and we think it will hover at the same quantum in 2Q19. Based on this parameter, we forecast a 2Q19 core net loss of RM105 million (-43% y-o-y). This could bring 1H19 core net loss to RM135 million (-13x y-o-y)," Mohsin said.

A lower load factor despite cutting capacity indicates a weak operating environment, he said.

Mohsin said the risk of an equity call in AAX cannot be ignored due to the limited borrowing capacity in AAX's balance sheet. The airline's net gearing as at end-March 2019 was 7.2 times, and this could swell further as it might have to reimburse Malaysia Airports Holdings Bhd for the PSC collection shortfall, he said.

"We deem AAX risk-reward as unfavourable and rank it as the riskiest Asia Pacific airline," he said.

Maybank maintained its sell call for AAX shares with an unchanged target price of 14 sen. At Bursa Malaysia today, AAX settled unchanged at 20.5 sen at the midday break, with some 15 million shares traded.