Analysts optimistic of AirAsia’s near-term prospects
KUCHING: Analysts are optimistic on AirAsia Bhd’s (AirAsia) near-term prospects supported by asset monetisation and the upcoming initial public offerings ( IPO) of both its Indonesian ( IAA) and Philippines ( PAA) operations.
This optimism comes following a recent analyst briefing held by AirAsia, where analysts were given clarity on a variety of AirAsia matters such as IAA and PAA’s capital position and insights into the structure of AAC.
HLIB Research, the research arm of Hong Leong Investment Bank Bhd, reported that the monetising or disposal of Asia Aviation Capital (AAC) is on track to be finalised in the second quarter of 2017 (2Q17).
Currently, AAC’s price tag is speculated to be around US$ 1 to US$ 1.2 billion and if it comes to realisation, the research arm of Midf Amanah Investment Bank Bhd (MIDF Research) expects this to result in a significant gain on disposal.
“For AAC, the value proposition lies on its existing fleet (29 owned aircraft), its readily available clientele (the AirAsia Group), and its larger aircraft orderbook with favourable pricing, which can be injected into the company,” HLIB Research said.
The research arm went on to report that AirAsia is also evaluating the idea of entering a sales and lease back agreement for another 38 A320s with AAC. The aircrafts which are valued at a total of US$ 0.9 to US$ 1.2 billion will definitely be a boost to AAC’s value proposition.
MIDF Research expects AAC’s asset monetisation to be the highlight for AirAsia in 2017 and anticipates special dividends to be paid out following its finalisation.
Looking towards the upcoming IPOs of IAAs and PAA, it was shared during the briefing that both companies had turned profitable operationally and could provide upside to AirAsia’s earnings forecasts.
Besides this, management was also reported to be studying various listing proposals such as reverse takeovers ( RTO) which could help raise fresh funds and diversify the shareholder base to comply with minimum domestic shareholder regulations.
“The idea of a dual listing in either Hong Kong or the US is aimed at drawing a broader investor base to enhance the company’s valuations is also being analysed.
“Ultimately, AirAsia aspires to list a holding company in Hong Kong which fully owns each of its operations across Asia,” said MIDF Research.
With expectations that AirAsia’s valuation will be enhanced by it asset monetisation and IPO exercises in 2017, both analysts’ have decided to maintain their ‘ Buy’ ratings on the stock with unchanged target prices.
HLIB Research’s target price sits at RM3.60 per share while MIDF Research’s TP comes in lower at RM3.45 for the airline.
Meanwhile, RHB Research Institute Sdn Bhd ( RHB Research) has maintained its ‘buy’ call with a target price of 50 sen on AirAsia X Bhd.
In a note yesterday, RHB Research said it expected the airline to stay profitable in 2017 amid new route additions and slower but continuing improvements in revenue yield.
“The airline is also expected to see ancillary revenue growth and gradual recovery in associate airline operations,” it said.
Aided by lower jet fuel prices, a higher load factor and strong growth in yields, AirAsia X reported its first full-year profit since its 2016 initial public offering.