AirAsia’s shares retreat to penny stock on gloomy financial outlook

Research houses are expecting the low-cost carrier’s share price to dip within the range of 21 sen to 90 sen


UNCERTAINTIES in the country’s policy on the reopening of international borders pushed back AirAsia Group Bhd’s share price, which ascended earlier this month, into a penny stock.

The carrier’s share price retreated to 0.98 sen, dropping 8.41% at 5pm yesterday, marking down its market capitalisation to RM3.7 billion.

It made a recovery in early March, exiting the penny-stock status following the group’s successful private placement exercise.

However, the cash-strapped carrier recently announced a hefty loss in its fourth quarter ended December 2020 (4Q20), with an RM2.45 billion net loss, plunging more than sixfold from RM384.44 million a year ago, while the revenue plummeted 12-fold from RM2.23 billion to RM267.44 million.

Research houses are expecting AirAsia’s share price to dip within the range of 21 sen to 90 sen with doubt in recovery continuing with the anticipated low passenger carried forecasts.

Hong Leong Investment Bank Bhd is maintaining its ‘Sell’ recommendation with a target price (TP) of 90 sen, based on the five times price-to-earnings ratio tagged to AisAsia’s earnings per share for its financial year 2022 (FY22).

The research house added that it remained concerned about the current negative equity position and the immediate rights issue exercise, while there is still on-going uncertainty of Covid-19, and the “new normal” affecting the government’s decision to allow air travel.

Meanwhile, Maybank Investment Bank Bhd (Maybank IB) is also recommending ‘Sell’ for AirAsia’s share price with the 12-month TP dropping 68% from the placement price of RM1.13 to 36 sen.

“A huge 4Q20 net loss turned AirAsia’s book value per share negative. Its 4Q20 and FY20’s core net loss still came in wider than we expected.

“With the current interstate travel ban and rising fuel prices, the forecast for FY21 will likely be another difficult year,” Maybank IB said.

The research house predicts the full recovery of passenger traffic will be delayed to 2023, while raising the average fuel price assumptions by US$10 per barrel (bbl) to US$65 (RM269.52) bbl.

“Our newly introduced FY23 forecasts still imply a core net loss then, albeit, a lot narrower. At this rate, we opine that a rights issue is inevitable,” it said.

With a ‘Sell’ recommendation, MIDF Amanah Investment Bank Bhd is lowering the TP for the low-cost carrier to 21 sen from 37 sen previously, following the negative book position and earnings forecast.

“Moving forward, AirAsia will continue to operate in a challenging environment amid the ravaging pandemic, border control and other measures that remain unconducive for the airline business.

“We revised downward the forecast to net losses for FY21 and FY22 at RM1.98 billion and RM610 million from RM97 million and RM174.1 million previously. There were on the back of net revenue forecasts at RM3.27 billion and RM8.21 billion for FY21 and FY22.

Public Investment Bank Bhd, which gave an ‘Underperform’ call for the low-cost carrier, set an unchanged TP of 39 sen and a 55% discount to the placement price.

“We are still wary over its balance sheet weakness and earnings risks near term. No change to our earnings estimates for now,” the research house said.