AIRASIA Group Bhd (AAGB) is expected to post losses in the next few quarters, which should, in turn, weigh down the low-cost carrier’s share price, said Affin Hwang Capital.
AAGB registered a “steep” headline net loss of RM804 mil for the first quarter ended March 31 due to RM302 mil of forex/derivatives losses and RM502 mil core loss from its underlying businesses, Affin Hwang analyst Isaac Chow said in a July 7 note.
“To weather the downturn, management has taken multiple measures to ensure sufficient liquidity in 2020 and targets extensive cost reduction in 2020 and 2021 (up to 50% cost cut in 2020),” he said.
AAGB’s management also guided that in addition to securing new loans, equity raising exercises looked imminent, Chow added.
But the research house cut its 2020 earnings and lowered its 12-month price target to 54 sen.
“We maintain our sell rating on AirAsia with a lower price target of RM0.54 (from RM0.78) based on an unchanged 0.8x FY20E book value,” Chow said.
He expects AAGB to continue running its business as a going concern, in anticipation of a liquidity boost from new loans and equity raising.
“Nonetheless, the business environment remains very challenging and we expect AirAsia to continue reporting losses in the coming quarters. This should in turn weigh down its share price.
“Key upside risks are: (i) stronger-than-expected rebound in passenger volume; and (ii) stronger-than-expected quarterly earnings due to savings from its cost optimisation initiatives,” Chow said. – July 7, 2020
