PETALING JAYA: Analysts have ‘sell’ calls for AirAsia X Bhd (AAX) following its disappointing results in the second quarter (Q2), with Q3 expected to be another loss-making quarter for the carrier.
MaybankIB Research deemed AAX risk-reward as unfavourable and ranked it as the riskiest Asia-Pacific airline.
“The risk of an equity call cannot be ignored due to the limited borrowing capacity in AAX’s balance sheet.
AAX’s net gearing in end-June 2019 was 10.6 times, and this could swell further as it might have to reimburse Malaysia Airports Hold-ings Bhd for the passenger service charge arrears,” it said.
AAX’s Q2’19 core net loss was RM185 million after adjusting for non-cash items and this was well below expectations, as yields and costs moved in a negative direction. The core net loss for 1H’19 was RM215 million compared with a loss of RM8 million for the same period last year.
“We expect AAX to remain loss-making in Q3’19 as it is the seasonally weakest quarter and AAX typically makes all its profit in Q4. The competitive pressures in Thailand and Indonesia have risen and AAX’s associates in these two countries would face greater challenges.
“Our revised FY19 loss forecast swells by 6.5 times from our previous forecast and we now think FY20 will be loss-making as well. Based on this, our target price has been cut to 11 sen. Sell,” said MaybankIB.
Affin Hwang Capital said while it expects AAX’s business prospects to improve in 2H’19 due to seasonal factors, the market condition remains challenging and AAX may miss the research house’s earlier earnings projection.
“We cut our 2019-21 earnings per share forecasts to reflect the soft market conditions, as reflected in AAX’s subdued passenger growth. All in, we expect AAX to report losses in 2019-20; the weak results should put pressure on AAX’s share price. Maintain sell with a lower target price of 14 sen,” it said.
It expects AAX’s business environ-ment to remain challenging in view of the subdued passenger growth and weak ringgit.
