AirAsia (BUY, TP: MYR2.65)
AirAsia has taken a proactive stance to pacify capacity growth, focus on
cost cutting initiatives and boost ancillary income. It is also planning to sell
12 older aircraft from its fleet in order to retain a young fleet. 2Q14 should
be a positive quarter for AirAsia due to the recovery in yields as well as the
positive impact of moving to klia2. Maintain BUY, with an unchanged
target price of MYR2.65, based on 10x FY14 PER, which is on par with the
global LCC average.
AirAsia X (HOLD, TP: MYR0.79)
AAX’s 1Q14 results have taken the share price to an all-time low and the
stock is now trading 42% lower than its IPO price. Weak yields on the
Australian routes were responsible for the loss making quarter. We expect
2Q14 results to be even worse given that it is the seasonally weakest
quarter for AAX. The Company is short of cash and will need to rely on
short-term financing to keep its business going in 2Q14; we think it will
recover to a position of strength from 2H14 which is its seasonally strong
period. Downgrade to HOLD with a revised target price of MYR0.79 (from
MYR0.86) based on an unchanged FY15 P/BV of 1.0x.
MAS (SELL, TP: MYR0.175)
MAS continued to disappoint with heavy losses in the first quarter
attributed to low yields. We expect weak performance to persist for the
remainder of the year as the Company struggles to push for higher yields
due to the MH370 incident. We have cut our FY14/15/16 earnings forecasts
and we don’t think MAS will be profitable in either of these years. In fact,
we believe MAS will need a capital injection in FY2015 in order to continue
its operations. The business case to privatise MAS and break it into smaller
companies is becoming stronger by the day and we think it is only a matter
of time before a restructuring is announced.
MAHB (SELL, TP: MYR7.03)
MAHB is enjoying spectacular traffic growth numbers, which are among the
highest in the world. However, it is at a capex heavy stage of its business
due to the launch of klia2 on 2 May and start-up losses at its 60% owned
Sabiha Gökçen Airport in Istanbul. The accounting treatment for klia2 as
well as the acquisition of Sabiha Gökçen in 2Q14 is also an uncertainty at
this stage. Maintain SELL with an unchanged target price of MYR7.03,
based on 10.3x 2015 EV/EBITDA.