Mixed views on AirAsia corporate revamp, earnings performance

PETALING JAYA: Analysts are mixed on AirAsia Bhd’s (AAB) corporate exercise and earnings performance for the first half of the year ended June 30.

HLIB Research maintained a BUY call on AirAsia’s shares at a higher price target of RM4.10 (from RM3.82) on the back of expectations for seasonally stronger earnings in the second half of the year.

The research house also expects a stronger load factor in the second half due to strong demand and sustainable yields. Its fuel requirement is also expected to be hedged at US$60 per barrel.

On top of that, AirAsia is expected to gain from the corporate exercise and the disposal of its Asian Aviation Centre of Excellence Sdn Bhd for RM429.30 million.
PublicInvest Research maintained a NEUTRAL call on AirAsia at a price target of RM3.19.

“Upon completion, there will be no significant changes to the effective shareholdings in IAA by AirAsia, which is up to 48.4% (currently holding 49% of IAA). In addition, there will be a total one-off gain of about RM230.4 million in FY17, owing to reversal of IAA’s impairment in AAB of RM207.5 million, as well as forex gain of RM22.9 million, this however subject to approvals be given for the transaction. We view the listing as positive as it should provide financial flexibility to IAA to pursue growth,” PublicInvest said.

“We understand that IAA is participating in the Indonesia Tax Amnesty Programme, which IAA will no longer be liable for any tax liability prior to FY16, whilst the existing deferred tax asset in IAA’s book prior to FY16 will also no longer be deductible against future profits,” it added.

HLIB also said it expects no significant impact on the group’s earnings and shareholdings from the corporate exercise which is expected to be completed in the first quarter of FY2018, as it is pending the approval of regulators and shareholders.

Meanwhile as analysts agreed that the group’s core net profit came within expectations, they differed on the quantum of the core earnings.

PublicInvest Research said the core net profit for the first half stood at RM775.70 million whereas HLIB Research said the earnings for the first six months were at RM667.60 million.

AAB shares fell one sen to RM3.32 with 26.7 million traded yesterday. It has a market capitalisation to RM11.1 billion.