by ANIS HAZIM / pic by TMR FILE 

ANALYSTS foresee stronger prospects for AirAsia X Bhd (AAX) moving forward with international borders gradually reopening and strengthened further by its cargo-driven focus model despite below expectation results for the second quarter of 2022 (2Q22). 

PublicInvest Research’s analyst Denny Oh noted that AAX’s net loss narrowed to RM11.3 million in 2Q22 from RM136.9 million in 1Q22 on higher revenue which is below his expectations. 

“We like the turnaround story of the group, though the full value is only likely to be attained with shareholders going through the entire corporate exercise including rights issue,” Oh said in a note yesterday. 

He said AAX’s revenue increased to RM119.3 million mainly due to higher revenue from freight services and charter flights, with minimal contribution from scheduled flights as international air travel and border restrictions remained in force during the quarter. 

The group’s operating expenses for 2Q22 also reduced by 28% compared to previous quarter. 

Meanwhile, Oh said AAX’s proposed debt restructuring will take effect upon lodgement of the sanction order with the Registrar of Companies of Malaysia which is expected to take place in the coming weeks. 

“The lodgement will mean that the scheme takes full legal effect with the financial impact reflected in the next quarter ended March 31. 

“As a result of the lodgement, all liabilities of AAX that will be forgiven under the scheme will be credited back to the income statement, effectively reversing the impairments and provisions made in the prior periods,” he noted. 

The group’s planned fundraising exercise will also commence upon completion of the scheme. 

The analyst sees that AAX’s air cargo is now a new growth driver for the group as the business has remained resilient even amid the pandemic with cargo demand expected to exceed pre-crisis (2019) levels by 13% this year. 

“AirAsia operated a total of three aircraft during the quarter and intends to add one plane a month, targeting to have a full fleet operational by the end of 3Q of the calendar year of 2022,” he added. 

According to him, the cargo and charter revenue is expected to continue to grow as more aircraft are progressively brought back into service, supplemented by scheduled flight revenue when international markets reopen. 

However, PublicInvest makes no changes to its forecast and reiterated its ‘Out-perform’ call on AAX with an unchanged target price of RM1.30, based on ex-all four times enterprise value/Ebitda of financial year 2023E.