EVEN amid the financial woes of its affiliate Thai AirAsia – and the spectre of a PN17 (Practice Note 17) classification – Maybank IB Research has upgraded the rating of Malaysia’s premier budget carrier AirAsia Group Bhd by two rungs to “buy” (from “sell” previously) as the research house turns positive on the falling number of new COVID-19 cases and prospect of rising fares.
A remarkable aspect of its upgrading exercise is probably the 278% hike in AirAsia’s target price to RM1.36 from 36 sen previously.
“A lot of value may also be unlocked by listing its digital assets. We now forecast a FY2023E core net profit of RM255 mil (core net loss of RM439 mil previously),” projected analyst Yin Shao Yang in a company update.
Nevertheless, Maybank IB Research cautioned that AirAsia may experience a huge RM1.1 bil in previously unrecognised losses from Thai AirAsia in FY2022E as it re-capitalises and restructures.
“Yet, the actual cash outflow to AirAsia is markedly smaller at RM169 mil. Come Jan 7 next year, we also opine that AirAsia will almost certainly be classified as a PN17 listed issuer due to its huge negative shareholders’ equity position,” opined the research house.
“That said, we gather that AirAsia can greatly reduce its negative shareholders’ equity position by end-FY2022E.”
On the other hand, Maybank IB Research is seeing the passing of dark clouds with new COVID-19 cases in AirAsia’s major markets (ie Malaysia, Indonesia, the Philippines and Thailand) decelerating as COVID-19 vaccination rates accelerate.
“Mass travel has resumed in all four major markets. The Malaysian aviation industry is also consolidating and this is positive for Malaysia AirAsia (MAA) fares,” justified the research house.
“MAA is especially important to AirAsia as it historically contributed the great majority of the airline’s group profits (70-80%). AirAsia may also unlock a lot of value by listing its digital assets.”
For FY2021E, Maybank IB Research expects AirAsia’s core net loss to be little changed (+3%).
“With a profitable FY2023E, we hope AirAsia will no longer be classified as a PN17 listed issuer by then (if it is classified as such on Jan 7, 2022).” – Nov 15, 2021
