HONG Leong IB Research (HLIB) Research has raised its target price for AirAsia Group Bhd to RM1.18 from 95 sen previously (ex-rights target price: 84 sen) on prospects of improving air-travel.
Nevertheless, the research house reiterated its “hold” rating on the budget carrier over concern of its current negative equity position which may result in Practice Note 17 (PN17) status (the management is still engaging Bursa Malaysia for potential extension).
HLIB Research further noted that AirAsia Group’s digital platform (Teleport, AirAsia.com, BigPay, Santan, BigRewards, Santan) continues to gain traction with increasing market share as the group expands both organically and through acquisitions of existing domestic digital platforms such as Dacsee (Malaysia), Delivereat (Malaysia) and Gojek (Thailand).
“Initial valuation of its digital ventures include AirAsia Superapp at US$1 bil (RM4.1 bil) and Teleport at US$300 mil (RM1.2 bil),” projected analyst Daniel Wong in a results review.
“The management has started exploring potential listing of the digital ventures through a SPAC (Special Purpose Acquisition Company) in NYSE (New York Stock Exchange)/Nasdaq.”
Earlier, HLIB Research observed that AirAsia Group continued to report dismal results with core net loss after minority interest (LATMI) of -RM677.4 mil for 3Q FY2021 ended Sept 30, 2021 which further dragged its 9M FY2021 LATMI’s to -RM2 bil vs HLIB’s FY2021 LATMI forecast of -RM2.3 bil and consensus’ -RM2.6 bil.
The weak earnings was mainly due to continuous strict movement control measures across ASEAN region which affected air travel demand during the quarter under review.
Meanwhile, MIDF Research retained both its “sell” rating and target price of 77 sen on AirAsia Group even as it expects a recovery in the demand for air travel to its regional destinations.
“We remain wary that it might take some time for revenue from seat bookings to fully return to pre-pandemic levels,” stated the research house.
“In addition, rising crude oil (in tandem, jet fuel) price is key concern to its forward profitability. Overall, we maintain our “sell” recommendation as we believe that the share price has overshot its fair valuation level.”
Interestingly, Maybank IB Research holds the most optimistic outlook for AirAsia as it maintained its “buy” call on the budget carrier albeit with a lower target price of RM1.31 (from RM1.36 previously) to reflect the issuance of more shares from the company’s rights issue exercise.
“Core net losses were narrower than we expected. 4Q 2021 core net loss ought to be narrower as mass air travel resumes,” projected analyst Yin Shao Yang.
“Our earnings estimates are little changed for now. In our view, AirAsia Group will be classified as a PN17 listed issuer but has the means to shed this classification in FY2023E. There could be more upside should BigPay secure an external valuation.”
At 9.38am, AirAsia was down 3.5 sen or 3.4% to 99.5 sen with 9.11 million shares traded, thus valuing the company at RM3.88 bil. – Nov 23, 2021
