TA Securities has maintained its buy call on AirAsia Group Bhd with an unchanged target price of RM2.01, based on 10x CY20 earnings per share (EPS).
TA Securities analyst Tan Kam Meng said: “AirAsia is a direct beneficiary of Visit Malaysia Year, where tourist arrivals are expected to rise. Moreover, the disposal of Malaysia Airlines Bhd to foreigners, if it happens this year, is expected to create a level playing field in the industry that will bode well for AirAsia’s future operations.”
Despite small operational hiccups resulting from floods in Indonesia and a volcanic eruption in the Philippines, AirAsia has an established network and operational agility to minimise the impact of natural disasters by deploying its aircraft to other destinations.
Jakarta, which is one of the main hubs in AirAsia’s network, was hit by a massive flood on New Year’s eve caused by high rainfall and river sedimentation. At least 60 people have died from this flood, which is the worst in over a decade. The flood has caused landslides, power outages, road closure and cancelled flights and train services.
According to the weather forecast, a rainy season is expected for the whole of this month. Rain and thunderstorms in Jakarta are expected to continue until Jan 22 before moderating in February.
AirAsia has 10 scheduled daily flights each from Kuala Lumpur to Jakarta and the return flight. Besides that, there are two scheduled daily flights from Penang to Jakarta which are served mainly by IAA. Also, there are three weekly departing and returning flights for the Johor Bahru-Jakarta route.
Separately, the Taal volcano, south of the Philippine capital Manila, erupted over the weekend and emitted a giant plume of ash. The authorities raised the alert level and evacuated 8,000 people, according to British Broadcasting Corporation. All flights to and from Ninoy Aquino International Airport (MNL) have been temporarily suspended, including by Malaysia AirAsia (MAA) and Philippines AirAsia (PAA).
In the Philippines, AirAsia has three daily flights each for Kuala Lumpur-Manila and Manila-Kuala Lumpur routes, where two of the services are carried out by MAA and one by PAA. There are also four weekly flights from Kota Kinabalu to Manila served by PAA’s aircraft.
Air Asia’s share price was at RM1.69, down by three sen before the Jan 14 mid-day break.