Wednesday, August 24, 2011

UOB Kay Hian Research maintains Sell on AirAsia

KUALA LUMPUR: UOB Kay Hian Malaysia Research is maintaining its Sell recommendation on AIRASIA BHD [] and its target price of RM3.50.

It said on Wednesday, Aug 24 the target price was based on 7.5 times enterprise value/earnings before interest, tax, depreciation and amortisation (EV/EBITDA), adjusted for the value of its Thailand and Indonesian associates.

'We lower our 2011 and 2012 net profit forecasts by 19.4% and 10.8% respectively, adjusting for lower average ticket prices and higher taxation,' it said.

UOB Kay Hian Research said net ticket prices including base fares, fuel surcharges and ancillary income fell 1% in 2Q11. Higher lease income compensated for that and revenue growth consequently matched passenger traffic growth at 15% on-year.

Operating margin was lower in 2Q11 as the higher fuel cost was not matched by the increase in revenue as AirAsia only implemented fuel surcharges in early May. Lower forex gains and a deferred tax charge led to net profit falling 48% on-year.

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