Quick take: Breath of fresh air for AirAsia, AAX, MAHB

KUALA LUMPUR: Shares of AirAsia Group, its affiliate AirAsia X and Malaysia Airports jumped in early trade on Tuesday on news about the development of the Covid-19 coronavirus vaccine.

At 9.49am, the FBM KLCI was up 14.64 points or 0.96% to 1,538.96. Turnover was 3.93 billion shares valued at RM2.19bil. There were 486 gainers, 502 losers and 306 counters unchanged.

MAHB rallied 72 sen to RM5.05, AirAsia jumped 14 sen to 67.5 sen and AAX rose three sen to seven sen. Genting gained 43 sen to RM3.42 on hopes of a resurgence in its activities.

AmInvestment Research said it has been advocating investors to lighten their positions in the “pandemic play”, i.e. glove stocks and replace them it with the “recovery play”.

“With the latest positive news coming in a rather abrupt manner, we expect volatility as investors in glove stocks rush to the exit at the same time, ” it said.

The research house upgraded its call for AirAsia to Trading Buy from Sell.

While maintaining its forecasts, it raised its fair value by 55% to 68 sen (vs. 44 sen previously) based on 10 times FY22F EPS (vs. 6.5 times FY22F EPS previously) to reflect the much positive outlook for airline industry following the emergence of a highly effective Covid-19 vaccine.

AmInvestment Research said at 10 times, it valued AirAsia at a discount to its global peers, Ryanair (27 times forward price-to-earnings) and Southwest Airlines (14 times forward PE) to reflect AirAsia’s relatively smaller size.

To recap, overnight, Pfizer and its partner and German partner BioNTech said that their experimental Covid-19 vaccine PFE.N is more than 90% effective with no serious safety concerns based on initial trial results.

The companies estimate that they can roll out up to 50mil doses this year (for 25mil people) and then produce up to 1.3bil doses in 2021.

The availability of an effective vaccine will mean that the cross-borders travel restrictions can finally be lifted, allowing the passengers to return to the sky again after almost a year of lockdowns and worldwide travel bans.

“This greatly enhanced the earnings certainty of AirAsia. Nonetheless, we do not rate AirAsia as an outright Buy as we are mindful of the urgent need for airlines, including AirAsia, to recapitalise their balance sheets on the massive losses they have suffered amidst a collapse in air travel since the pandemic.

“We caution on a potential steep downwards adjustment to AirAsia’s share price in the event of a highly dilutive equity-raising exercise, ” AmInvestment Research said.

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vaccine , AirAsia , AirAsia X , Genting , Covid-19


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