AirAsia stellar performance hard to repeat

- Reuters

KUALA LUMPUR:  AirAsia Bhd's  2016’s stellar performace will be hard to repeat next year due  the higher competitive pressures and volatile ringgit fluctuations, says Maybank Investment Bank Research.

The research house said on Friday the low-cost carrier's third quarter of financial year 2016 (3QFY16) core earnings jumped 280% year-on-year to RM459mil and was above its expectations.

Load factor and yields have continued to benefit immensely from the industry capacity crunch as Malaysia Airlines Bhd (MAB) cut significant capacity. 

This has helped to push AirAsia’s 3QFY16 load factor to a record 89.3% and yields up by 9.2% on-year.

The research house is also bullish on the outlook for AirAsia’s fourth quarter. 

“However, as for 2017, Maybank IB Research foresees the yield outlook to soften as competitors, namely Malindo Air and MAB have boosted their capacity output and have been aggressive in their ticket pricing.

AirAsia’s Indian, Japanese and the Philippines associates have continued to underperform and have dragged down the group.

Despite its expectations of earnings decline in 2017, the research house maintained its “buy” call on AirAsia’s shares, with an unchanged target price of RM3.17.

Meanwhile, MIDF Equities Research said that AirAsia’s core profit after tax and minority interest (PATAMI) in the first nine months of financial year 2016 (9MFY16) surged by 130% YoY to RM966mil and was within its forecast.

The research house indicated that the sell down noticed in AirAsia’s share price by, could have stemmed from the ringgit losing ground against the greenback.

“However, we are not too concerned about the falling ringgit as AirAsia’s unhedged exposure to US dollar for its borrowings and expenses are capped at 33% and 50% respectively. 

“In addition, October-November 2016 average USD/Ringgit exchange rate stands at 4.23, still below the 4.28 recorded in 4QFY15 which saw AirAsia recording core net profit of RM464mil,” siad MIDF Research in its report.

The research house also maintained its “buy” call but raised its target price higher to RM3.45.