AirAsia shares tumble
Investors take profit ahead of low-cost airline’s Q1 results
PETALING JAYA: Shares of AirAsia Bhd plunged 31 sen to RM2.94 yesterday as investors took profit following a steady rise in the stock since the start of the year.
An analyst said the stock likely came under selling pressure after being overbought by investors.
“The stock has (risen) more than 60% and hit a high of RM3.44 on May 15,” he said.
The profit-taking came ahead of the low-cost carrier’s first-quarter earnings results today.
According to CIMB Research, AirAsia’s share price started rallying in mid-2016 when news of the intended sale of its leasing arm, Asia Aviation Capital (AAC), “began to filter through.”
“The sale was expected by the market and by us to result in a large special dividend of about RM1 per share.
“AirAsia is scheduled to announce the winning bidder for AAC very soon, and we expect the special dividends to be paid by the end of this year.
“However, beyond this, we think the outlook for AirAsia has clouded over,” it said.
CIMB Research added that AirAsia looked set to record strong first-quarter earnings, having reported a strong load factor of close to 90% and higher-than-expected dividends from the AAC sale.
“However, on the balance of probabilities, we believe AirAsia’s share price upside is limited after the recent rally, with downside risks coming from multiple sources, both within and without AirAsia’s direct control.”
A potential oil price hike could have an impact on the stock, the research house said.
“Saudi Arabia and Russia have agreed to extend oil production cuts to the first quarter of 2018, which could push oil prices higher.
“In our view, the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec nations may extend production cuts until the fourth quarter of 2018.”
CIMB Research said AirAsia had locked in at least three quarter of its jet fuel requirements for this year at US$60 (RM258) per barrel, but it is more exposed next year, when the risks have emerged.
“We estimate every US$5 (RM21) per barrel rise in jet fuel price would reduce group core earnings per share in 2017 by 5%.”
Meanwhile, AirAsia’s sister company, AirAsia X (AAX), saw profits for the first quarter ended March 31 dragged down by higher expenses such as aircraft fuel cost, which had ballooned by 55% from a year earlier. Its net profit fell to RM10.34mil from RM179.49mil previously, while revenue increased to RM1.18bil from RM970.67mil in the previous corresponding period.