WITH the expected gradual pick up in domestic operations come 4Q 2021 following the easing of travel restrictions as Malaysia progresses towards the latter stages of the National Recovery Plan (NRP), ‘bluer’ skies maybe in sight for AirAsia Group Bhd.
Against such backdrop, PublicInvest Research has upgraded the budget carrier to “neutral” (from “sell” previously) as it is now less pessimistic over the group’s prospects moving forward.
Moreover, the company is in the midst of resolving its liquidity issue with:
- Fundraising on track with RM1 bil from its rights issue expected to be completed in December 2021 and RM1 bil from Danajamin scheme in progress; and
- Successful lease restructuring; and
- Digital business gaining traction with speedy roll-outs of services, strong growth in revenue and monthly active users (MAU).
“We also change our valuation methodology to sum-of-parts based which sees AirAsia’s target price revised to 86 sen (from 19 sen previously) based on prospective book value,” the research house pointed out in a results review.
AirAsia’s 2Q FY2021 headline net loss narrowed to RM719.6 mil from a loss of RM1.16 bil in the corresponding period a year ago.
Stripping out one-off items, the group’s 1H FY2021 core net loss is estimated at RM1.27 bil which comes in below PublicInvest Research and consensus full year estimates. The discrepancy is primarily due to revenue shortfall as COVID-19 travel restrictions remained.
“We have ascribed values to the other businesses (super-app, logistics, fintech) based on recent transactions undertaken,” noted the research house. “While still some way off in fully rehabilitating the airline business, we are now less pessimistic on AAGB’s prospects.”
Hong Leong Investment Bank (HLIB) Research also upgraded AirAsia to “hold” (from “sell” previously) with a higher target price of 95 sen (ex-rights target price: 68 sen) from 56 sen previously based on eight times FY2023 price-to-earnings ratio (PE).
While there are pockets of relaxation on domestic travel, the research house said they seem to be at a nascent stage with international travel will only be gradually allowed towards 2H FY2022.
“On a more positive note, the group’s digital platform (Teleport, AirAsia.com, BigPay, Santan and BigRewards) continued to gain traction as it acquired a few domestic digital platforms, ie Dacsee (Malaysia), Delivereat (Malaysia) and Gojek (Thailand),” opined HLIB Research.
“The group will eventually list its digital ventures initiative through a SPAC (Special Purpose Acquisition Company).”
While the worse seems to be over, the research house added that it remains concern over AirAsia’s pace of recovery, negative equity position and dilutive rights issue exercise.
At 9.15am, AirAsia was up 1.5 sen or 1.59% to 96 sen with 3.4 million shares traded, thus valuing the company at RM3.74 bil. – Sept 9, 2021
