KUALA LUMPUR (Feb 17): Maybank IB Research believes that AirAsia Bhd's upcoming fourth quarter (4QFY15) results could exceed expectations by a marginal 2% of its full-year core net profit forecast of RM716 million.
The research house said that the load factor in 4Q15 was exceptionally strong at 84.8% and fuel price was lower than forecast.
"We forecast a record 4Q15 core net profit of RM350 million, which will surpass the previous record set in 4Q10. Overall the market will be pleased and build on the bullish case for AirAsia," Maybank said.
Maybank maintained a "buy" call on AirAsia, with an unchanged target price of RM1.75 with 31% upside potential, based on one time financial year 2016 (FY16) price-book value (P/BV) premised on floor valuation as the market is still cautious about its associates.
It said that AirAsia's stock price was severely battered in mid-2015 when concerns over its associates' funding needs and a report critical of the group from an independent research house surfaced. The stock has since stabilised and trades rangebound between RM1.30 and RM1.40.
"We think the strong upcoming 4Q15 results will provide a leg-up to the stock price to head towards our target price of RM1.75," it added.
Maybank also expresses caution over the impact of the weakening ringgit by 5% quarter-on-quarter against the US dollar in 4Q15 towards AirAsia as this will result in another foreign translation loss for AirAsia which has 87% of its RM13.8 billion debt (end-Sept 2015) in US dollar.
"While the quantum of unrealised forex loss is likely to be large, we reiterate that this would be a non-cash item, and that AirAsia has hedged 56% of its USD loan liabilities at an average rate of 3.2348 USD/MYR. In reality, AirAsia's FX cost management is superior to its regional peers," it added.
Nevertheless, Maybank believed that AirAsia will be the prime beneficiary of Malaysian Airlines Bhd's capacity cuts as traffic would flow to AirAsia. This will enable it to capture higher traffic growth, boost load factors and have better pricing power.
The decline in fuel prices will also provide substantial cost savings and boost its bottom line, it added.
AirAsia shares rose three sen or 2.24% to RM1.37, with 2.05 million shares done as at 10am.