MIDF Research maintains its sell call on AirAsia Group Berhad (AAGB) at a target price of 40 sen, after factoring expected losses and precarious circumstances of the global airlines industry brought on by the air travel restrictions to stem the spread of Covid-19 pandemic.
“Going forward, we are uncertain of how the ‘new norm’ will alter consumer demand for air travel even post Covid-19 as everything is up on the air. We believe that there might be possibility of shrinking market size, due to the regional economic contraction,” MIDF Research said.
“Operationally, there is a small evidence of a potential recovery. Despite this, we believe that the odds are stacked against AAGB and we are not convinced yet on the recovery narrative,” it added.
Yesterday, AirAsia Group expressed its interest to raise capital for its digital business arm, however the management only indicated on new debt capital for Teleport and Santan.
“While the details on the potential contribution from AirAsia Digital remains scarce, we opine that these sorts of digital initiative will take a couple of years to bear fruit.
“We believe AAGB will continue to operate in a challenging environment amidst persistent pandemic development, border control and other measures that remains unconducive for airline business to operate in,” MIDF Research pointed out.
Reiterating its forecast, MIDF Research said: “We are expecting a decline across the board, below financial year ended Dec 31, 2019 (FY19) level. Hence, we are maintaining our earnings estimate for the financial year ending 2021 and 2022, while keeping positive earnings estimate for the financial year 2022.”
As at 9.18am today, AAGB share price was at 66 sen with a market capital of 2.19 bil. – Sept 25, 2020
