AirAsia 1H net loss exceeds estimates, Maybank IB Research says


  • Analyst Reports
  • Wednesday, 26 Aug 2020

KUALA LUMPUR: Low-cost carrier AirAsia Group Bhd’s (AAGB) six-months core net loss exceeded Maybank Investment Bank Research and consensus financial year’s estimates.

It said on Wednesday that flights have resumed but it expects any recovery to be slow without a cure or vaccine for Covid-19.

“Until then, EPS and book value per share (BVPS) may be diluted via more debt and/or rights issue,” it said.

“We cut our FY20E/FY21E/FY22E net loss/profit by RM600mil/RM50mil/RM70mil. Ascribing an unchanged 1.4 times FY21E P/BV (post-2013 12M forward P/BV mean), we cut our TP to 67 sen from 92 sen and downgrade AAGB to Sell from Hold,” it said.

Maybank IB Research said AAGB’s 2Q20/6M20 losses were a lot wider than expected.

The 2Q20 core net loss of RM1.2bil brought 6M20 core net loss to RM1.7bil, which was below its expectations at 104%/110% of its/consensus FY estimate.

The earnings shortfall was largely due to loss on settlement on fuel hedges (2Q20: RM198.5mil, 6M20: RM308.5mil) as AAGB effectively over-hedged due to the Covid-19 pandemic grounding most of its fleet in 2Q20.

“These losses effectively inflated average fuel prices (2Q20: US$764/bbl, 2Q19: US$87/bbl).

“Taking flight again but recovery may not be even AAGB has resumed flights in the countries it operates in though international flights remain scarce,” the research house said.

For Malaysia, Indonesia and Philippines (subsidiaries), AAGB plans to operate at 75%/35%/60% of preCovid-19 domestic capacity by 4Q20.

For Thailand and India (associates), AAGB plans to operate at 105%/75% of pre-Covid-19 domestic capacity by 4Q20.

On another note, AAGB will decide on the future of its Japanese associate soon but does not intend to exit its Indian associate.

“For FY20E, we account not only for the aforesaid loss on settlement on fuel hedges by AAGB’s subsidiaries but potentially by its associates also.

“That said, we widen/cut our FY21E net loss/FY22E net profit by a narrower RM50mil/RM70mil to account for an additional RM1bil of debt under the Danajamin PRIHATIN Guarantee Scheme.

“Yet, there are still risks to earnings if international flights from Malaysia remain banned by the Recovery Movement Control Order being extended past Aug 31, 2020,” it said.

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