AS opposed to harping on its Practice Note 17 classification, PublicInvest Research has appeared to be more sanguine on AirAsia Group Bhd, preferring to look at the budget carrier’s operating statistics which showed strong recoveries in its 4Q FY2021.
This is given the airline which posted a 103% year-on-year and 674% quarter-on-quarter increase in its passenger volume for the consolidated aircraft operating certificate (AOC) operations (Malaysia, Indonesia and Philippines) to 2.72 million during the said financial quarter.
This surpassed its capacity increase of 70%, leading to a 13-percentage point improvement in load factor to 80%.
These improvements came about following strong demand from easing of travel restrictions in 4Q FY2021 with the introduction of quarantine-free travel bubble for Malaysia.
While demand is expected to continue to improve, following announcement that the Malaysian Government has resumed the Vaccinated Travel Lane (VTL) between Malaysia and Singapore effective Jan 24, PublicInvest Research is, however, wary over the group’s PN17 status and challenges it may face in pulling itself out of the situation.
“While we see value in its non-airline business and there appears to be attractive upside to our unchanged 79 sen target price (“neutral” rating reiterated), we suggest investors wait for more clarity on the group’s turnaround plans,” opined analyst Denny Oh in a company update.
Contrast PublicInvest outlook with that of CGS-CIMB Research which recently lowered AirAsia Group’s target price to 9 sen (from 14 sen previously) on grounds that the budget carrier needs a gargantuan “maximum RM7.4 bil boost in its shareholders’ funds for a PN17 uplift”.
“With paid-up share capital of RM8.5 bil as of Sept 30, 2021, this means that AirAsia Group will need a minimum shareholders’ equity of RM4.2 bil,” rationalised analyst Raymond Chong in a company update.
“By contrast, AirAsia Group had a negative shareholders’ funds position of RM3.2 bil as of Sept 30, 2022. Hence, in order to be uplifted from PN17, it will needs a RM7.4 bil boost to its shareholders’ funds on a proforma basis.
“The gap is a moving target; while RM197 mil (20%) of the RM975 mil RCUIDS (redeemable convertible unsecured Islamic debt securities) has been converted into new ordinary shares, ongoing business losses will almost certainly widen the gap.”
At 10.54am, AirAsia was unchanged at 58 sen with 2.17 million shares traded, thus valuing the airline at RM2.41 bil. – Jan 28, 2022
