AirAsia price drop deemed from profit-taking activities

PETALING JAYA: The fall in low-cost carrier (LCC) AirAsia Bhd's share price yesterday was likely due to investors locking in profits after the airline's share price has doubled in the last six months.

Its share price shed 12 sen, or 4%, to end at RM2.82 yesterday with some 28.8 million shares traded. It hit an intra-day low of RM2.69.

Analysts said the decline in AirAsia's share price could be attributed to profit-taking activities by foreign investors, since more than half of the company's shares were held by foreigners. As at Dec 30 last year, 51.55% of AirAsia's issued and paid-up share capital were held by foreigners.

AirAsia also told Bursa Malaysia yesterday in three separate filings that AirAsia group chief executive officer Datuk Seri Tony Fernandes, group deputy CEO Datuk Kamarudin Meranun and independent non-executive director Datuk Fam Lee Ee intend to deal in AirAsia securities during the closed period.

Maybank Investment Bank Bhd said in a report to its clients that the decline in AirAsia's share price was mainly sentiment driven as fundamentals were largely absent yesterday. The report added that share prices of European LCCs such as EasyJet and Ryanair had also fallen, thus possibly impacting AirAsia's share price as they might share common foreign shareholders who decided to realise profits and discount accordingly.

“Looking across Europe, UK-based LCC EasyJet stated that their first-half losses may double from the year before, resulting in its share price falling. Although Ryanair's performance is historically better and not-akin to EasyJet's behaviour, its share price fell,” Maybank said.

A foreign research house analyst said AirAsia's fall in share price was in line with the lower broader market due to profit-taking activities. The local benchmark, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI), shed 4.46 points, or 0.29%, to end at 1,542.97 yesterday.

Maybank said AirAsia remained an attractive buy against other global LCC as it was trading at a discount of 40%-47% against its peers.

“Our one-year forward target of RM3.36 is based on a 2% discount to the market. We see a 23% upside to fair value,” it said.

The research report also highlighted that AirAsia's volatility had surged by 24% to 1.26 from a year ago, making it one of the most volatile FBM KLCI stocks. In addition, it is also the second most volatile LCC stock in the world.

Fernandes told StarBiz via a text message that the company's fundamentals remained good and he was not concerned with the decline seen in the airline's share price.

According to Bloomberg data, 19 out of 25 analysts have given the airline a target price of above RM3, with Credit Suisse placing the highest target price at RM4.30.

AirAsia recorded its highest closing price at RM3.04 on Jan 13 this year, since the company was listed on the local bourse in late 2004.

Meanwhile, AirAsia released its preliminary operating statistics yesterday for the last quarter of 2010. For the fourth quarter ended Dec 31, passengers carried by AirAsia in Malaysia grew 11.1% to 4.44 million from a year ago with a 3% rise in load factor to 82% for the period.

For the three months ended December, passengers carried by Thai AirAsia was up 13.2% to 1.62 million from a year ago with a 1% drop in load factor to 80% for the period.

Passengers carried by Indonesia AirAsia increase 6.5% to over a million with load factor rising 4% to 78% for the quarter ended December.

In total, AirAsia group carried 25.68 million passengers for the whole of last year, representing 13.1% growth from 2009. From the 25.68 million passengers carried, about 63% was from its Malaysian operations, 22% from Thai AirAsia and 15% from Indonesia AirAsia. The group's overall load factor stood at 78% for the full year against 75% in 2009.

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