MIDF ‘neutral’ on AirAsia X with 22 sen target price
KUALA LUMPUR: MIDF Research has revised downward AirAsia X Bhd’s target price to 22 sen from 27 sen previously, following an adjustment in its earnings’ prospects.
The research house has maintained a “neutral” call on AirAsia X.
It also revised the airline’s earnings forecast for financial years 2019 and 2020 (FY19 and FY20) to RM68.7 million and RM74.4 million, respectively, on higher financing costs following the adoption of the Malaysian Financial Reporting Standard 16 and increased maintenance and overhaul expenses amid an ageing fleet.
“We maintain our view of AirAsia X’s ability to record a profit for FY19. This could be possible through various cost reduction initiatives and better capacity utilisation. We opine that passenger growth in Malaysia would remain intact despite the outbound levy, which is likely to take effect in August,” it said yesterday.
MIDF Research said there was a possibility that consumers would shift from a pricier full-service carrier to a low-cost carrier such as AirAsia X, especially if similar destinations were offered.
Moving forward, it opined that the decline in available seat kilometres (ASK) and revenue passenger kilometres (RPK) would be shortlived, as the termination of non-core routes would enable AirAsia X to redeploy capacity to main markets in greater China, Japan, India and South Korea.
“The main routes under focus are Taipei-Osaka, which has seen a strong load factor since its commencement in January, and Kuala Lumpur-Fukuoka, which will enhance brand presence before the Tokyo 2020 Olympics.
“With no planned addition of aircraft, AirAsia X would be able to maximise aircraft utilisation when new routes in the said markets are launched in the second half FY19,” it added.
AirAsia X shares closed flat at 0.225 sen yesterday.