DESPITE raking in what it described as wider than expected 1Q FY2021 core net loss of RM1.2 bil, CGS-CIMB has upped AirAsia Group Bhd’s target price from 5 sen to 19 sen in its latest assessment following a release of the budget carrier’s 1Q FY2021 results yesterday.
Although the airline’s net liability position stood at RM1.6 bil as of end-March, the research house said its end-2021F revised net asset value (RNAV) of 19 sen assumes a RM1 bil rights issue (2.22 billion shares at 45 sen each) and a 30% reduction in lease liabilities via lease rate discounts and/or lease term extensions (similar to the deal hammered out by Malaysia Airlines with its lessors).
On a negative side, CGS-CIMB Research has removed its previous inputting of a RM2 bil value to AirAsia’s digital businesses based on price-to-sales ratio (P/S) of five times on historical FY2020 sales given “this may be difficult to realise and is highly speculative”.
All-in-all, the research house reiterated its “reduce” call on AirAsia it is now projecting even lower traffic volumes in 2021F than 2020 although a much lower operating cost may help core losses to narrow on a year-on-year (yoy) basis.
“We raise our target price to 19 sen (from 5 sen previousy) as we pencil in a potential 30% cut to operating lease liabilities, still based on price/RNAV of one time,” justified analyst Raymond Goh in a results review.
Hong Leong Investment Bank (HLIB) Research also maintained its “sell” recommendation on AirAsia with a lower target price of 56 sen (from 70 sen previously) based on eight times price-to-earnings ratio (PE) tagged to FY2023 earnings per share (EPS).
“We remain concern on the current negative equity position and the immediate rights issue exercise, while there is still on-going uncertainty on COVID-19 as well as the ‘new normal’ affecting the Government’s decision to allow air travel,” opined analyst Daniel Wong.
On a more positive note, however, the research house observed that the group’s digital platform (ie Teleport, AirAsia.com, BigPay, Santan and BigRewards) has continued to gain traction during this tough period.
“Among the new services include ride-hailing services, medical tourism package, food delivery and grocery delivery,” noted HLIB Research.
“The group is (also) converting two A320s into cargo plane configuration and leasing-in another B737 cargo plane in order to leverage on the strong growth demand for Teleport courier logistic business.”
Meanwhile, TA Securities Research is the most bullish research house on AirAsia, maintaining its “buy” rating with a target price of RM1.18/share (from RM1.23 previously) based on its unchanged PE of eight times.
“The RM1 bil Danajamin loans, of which RM500 mil would be received soon, have boosted our confidence on the group’s survivorship until Malaysia achieves the herd immunity,” suggested analyst Tan Kam Meng.
“Thus, we continue to value AirAsia based on CY 2022 earnings when the group is expected to come out of the pandemic.”
At 12.02pm, AirAsia was up 1 sen or 1.16% at 87 sen with 5.02 million shares traded, thus valuing the company at RM3.1 bil. – May 28, 2021
