AirAsia converted 2.1 billion rupiah (RM621.5mil) of the 4.3 bil rupiah (RM1,292.4mil) due from Indonesia AirAsia to perpetual capital securities in the latter
KUALA LUMPUR: Maybank Investment Bank Research has upgraded AirAsia Bhd to Buy from Hold with a new target price of RM2.50 based on three factors.
The research house said on Monday that the first factor was the benefit of the new capital injection from the issuance of 559 million new AirAsia shares to Tune Live Sdn Bhd.
It said the move will raise RM1bil for AirAsia and lower its net gearing level to 1.8x from 2.3x currently.
The founder’s effective control in AirAsia will rise to 32.5%, just short of the 33% mandatory takeover limit.
“Second, we tweak up our FY16-18 net profit forecasts by 1.6%, 3.8% and 4.1% respectively on lower interest payments.
“Third, we switch to global peer average price earnings ratio as the valuation metric as many risk factors have abated,” it said in a note.
Maybank Research added that it expects the low-cost airline’s 1Q16 core net profit to come in at RM178.8mil, a 62.8% increase on-year and 952% increase on-quarter, on the its strong operating performance with 16.9% passenger traffic growth on-year and a load factor of 85.4% — a record performance for the first quarter.
“The group will also benefit from a step down in fuel cost as its expensive fuel hedges have expired at the end of 2015.
It forecast unit fuel cost will plunge by 39% on-year in 1Q16 to USD54/bbl.
The research house said at RM179mil core net profit, 1Q16 results would meet expectations at 23% and 20% of its and street’s full year forecast.
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