AirAsia X eyes Hawaii after getting FAA nod to fly to US
KUALA LUMPUR: PublicInvest Research has upgraded AirAsia X Bhd
(AAX) to “outperform” with a target price of 28 sen based on 1.6 times FY16 forecast price-to-book value (P/BV).
“We feel AAX deserves a higher valuation as we see clearer signs of a turnaround in its operations. We believe 1.6 times P/BV is not excessive as it is near two standard deviation below its three years historical average and is in-line with the sector’s average of low-cost carriers peers,” the research house said.
PublicInvest said the low-cost medium-haul airline hosted a meeting with analysts recently and hinted that its fourth quarter ended Dec 31, 2015 results would be showing some signs of improvement. Their key strategies are to grow fares and load, increase flights frequency, explore new routes such as Auckland and Delhi, and improve the connectivity with short-haul operations.
“We believe that 2016 will be a better year for the group as it should reap the benefits of maturing routes and falling oil prices,” it said.
AAX has announced that the group will be expanding its operations this year to New Delhi and Auckland (via Gold Coast), which are scheduled to commence in February and March 2016 respectively. It is also looking at adding capacity in China market such as increasing capacity in performed routes of Chengdu, Shanghai and Beijing.
In addition, the group also plans to enter into Hawaian market (via Osaka), which they are still in the midst of reviewing the business case, while also waiting for the route approval.
“By having these new routes, we anticipate AAX to have some growth in its yields and at the same time improving its connectivity to AirAsia short-haul operations,” PublicInvest said, adding that AAX expects to have four aircraft delivery in FY16, which two of the aircraft was deferred from last year.
The research house noted that AAX has hedged 47% of its fuel cost for FY16 at an average of US$60 per barrel, which was lower than FY15 at US$88 per barrel.
“Management currently is budgeting that the group will be profitable at the level of fuel cost at US$70 per barrel and currency of RM4.20. The group will enjoy a much better number if the fuel cost level is at US$50 per barrel and currency of RM4.40,” PublicInvest said.
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