KUALA LUMPUR (Jan 8): Maybank Investment Bank Bhd has an "overweight" call on the Malaysian aviation sector, taking into account industry traffic growth and airlines' attractive share valuations.
In a note today, Maybank Investment noted that airline stocks in Malaysia were “too cheap to ignore".
"Airline stocks in Malaysia have been among the worst performers, with AirAsia Bhd and AirAsia X Bhd trading at historical low P/BV multiples of 0.88x and 0.80x, respectively.
"We forecast traffic growth of 6.3% in 2016. This is based on our house GDP growth forecast of 4.5%, times the historical air traffic growth-to-GDP multiplier of 1.4x," Maybank Investment said.
Maybank Investment said it had cut its target price (TP) for AirAsia shares to RM1.75, from RM2.30 previously. The TP came with an unchanged "buy" call.
On AirAsia X, Maybank Investment said it maintained its 21 sen TP and "hold" recommmendation for the stock.
At 10:39am, AirAsia shares were traded unchanged at RM1.39 for a market capitalisation of RM3.87 billion. AirAsia X also changed hands flat at at 10:40am at 18 sen for market value of RM746.7 million.
Maybank Investment's "overweight" call on the Malaysian aviation sector came amid a positive outlook for the global industry.
The research house said it maintained its “positive” rating on the regional aviation sector, with a forecast growth of 24.7% for Asian airlines’ profit in 2016 in US dollar terms.
(Note: 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.)