AirAsia Group
KUALA LUMPUR: AirAsia Group’s (AAGB) outlook remains steady as market leader in the industry with 41.7% market share, says Alliance DBS Research.
In a research note issued on Wednesday, it said expansion plans are underway with 18 new aircraft for FY19.
“ASK (available seat kilometres) is expected to grow at 9.8% and RPK (revenue passenger kilometres) at 10.1% backed by load factors of 84.7%. Subdued fuel prices would help support earnings.
“Ancillary income would also grow as AAGB ramps up REDCargo and AirAsia.com. The ancillary business contributed 20% to group revenue in FY18 and has potential to grow.
“However, we expect these factors to be more than offset by higher leasing expenses post disposal of assets,” it said.
Alliance DBS Research said with current share price trading at 1.1 times price-to-book value, it feels positives have been priced in and retained its Hold rating for the stock with a lower TP RM2.38.
The research house was more conservative on its FY19 projections as it input higher costs from leasing expenses. It cut FY19F/20F earnings by 15.0%/19.4%.
It also pointed out the group’s earnings are highly sensitive to changes in yields (fares/RPK) or higher fuel prices across its airline units in Asia, which would have an impact on margins and bottom line.
“Following our earnings change, we lowered our TP to RM2.38. Our TP is based on 1x FY19F P/BV and includes 13 sen special dividend from the Castlelake sale which is targeted to complete by 3QFY19,” it said.
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