Thursday 28 Mar 2024
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KUALA LUMPUR (December 29): Low-cost carrier AirAsia Bhd's share price may experience some weakness in the near term, said aviation analysts, after its Indonesian associate's plane went missing on Dec 28.

AirAsia Indonesia’s flight SQ8501 from Surabaya to Indonesia lost contact early Sunday morning, some 42 minutes into a scheduled two-and-a-half hour flight.

Authorities in Indonesia and Singapore have launched search and rescue operations to locate the missing plane.

Following the development, AirAsia’s share price fell as much as 38 sen or 12.9%, its biggest one-day decline yet, to reach a low of RM2.56 in the morning trading session, and was among the top decliners on the exchange.

The counter was also the most active stock on the bourse, with some 61.8 million shares traded.

In a note today, Maybank Investment Bank Bhd’s Mohshin Aziz expects weakness in the group’s share price in the near term, while the research house reviews its call on AirAsia.

“Expect share price weakness in the near term. Our FY15-16 earnings forecasts have downside bias and our ‘buy’ call and target price, pegged to 11 times FY15 price-to-earnings ratio are under review,” he said.

Mohshin said there would be some financial impact from the incident, but saw it being contained due to the group’s 49% holding in AirAsia Indonesia.

Mohshin has placed his "buy” rating on AirAsia and target price (TP) of RM3.25 under review.

Meanwhile, Public Investment Bank Bhd (PublicInvest) does not expect a significant impact from the tragedy.

“We expect it will not result in a significant financial impact but more of a market sentiment issue on short term basis.

“However, it might affect short-term demand for air travel, hence near-term passenger growth and earnings may be under pressure,” said the research house.

Going forward, PublicInvest expects softer market sentiment for the aviation segment in the first quarter of 2015, due to the number of air incidents this year.

However, it said forward bookings made earlier would cushion the impact of negative sentiments.

The research house maintained “outperform” on AirAsia, with a target price of RM3.30.

RHB Research Institute Sdn Bhd analyst Ahmad Maghfur Osman said that while the incident would mostly impact AirAsia Indonesia, it might affect yields of the AirAsia group as a whole.

“A 2.5% reduction from our base case on the underlying yields for FY15 (assuming load factor stays unchanged) would reduce FY15 earnings by 6%.

“But with yields already at rock bottom levels as a result of Malaysian Airline System Bhd’s irrational pricing strategy, we estimate that AirAsia’s downside in yields would not be hard hit,” said Ahmad.

The research house forecasts a share of losses of RM30 million from AirAsia Indonesia in FY15, but said that if losses were magnified to RM90 million, it could warrant a reduction in its target price to RM3.21.

RHB kept its “buy” call on AirAsia, with a target price of RM3.49, and said that the dip in the group’s share price presents an opportunity to accumulate as it expects a rebound to follow the weakness.

According to Bloomberg data, despite the significant fall today, AirAsia’s share price has appreciated 23.2% year-to-date, outperforming the FBM KLCI which fell 5.4% during the same period.

AirAsia fell 24 sen or 8.2% to RM2.71 at 12.30pm, lowering its market capitalisation to RM7.54 billion.

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