Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: AMMB
AirAsia Bhd
(May 11, RM3.15)
Maintain buy at RM3.04 with fair value of RM3.60: We reaffirm our 'buy' rating on AirAsia Bhd (AA) with an unchanged fair value of RM3.60. Our valuation continues to peg AA at 11 times FY11F earnings, a 20% discount to its historical average price-earnings ratio of 14 times.
AirAsia X (a 16%-owned affiliate of AA) announced that its proposed IPO could be delayed to next year instead of the original 2H11. The appointment of advisers has not been finalised yet.
AA had earlier indicated the possibility of divesting its 16% stake in AirAsia X when it goes for listing, thereby potentially realising gains of up to RM230 million or close to 10 sen per share, on our estimates.
Although AirAsia X's IPO could be delayed, note that we have not factored in any potential gains from sale of AA's stake in AirAsia X into our valuation. As such, we do not expect a significant negative impact on the share price as a result of this development.
Also note that we have not yet factored in any incremental value from the listing of AA's 49%-owned associates, Thai AirAsia and Indonesia AirAsia. These associates are scheduled to be listed in 3Q11 and 4Q11, respectively.
We expect the listing of Thai AirAsia (TAA) and Indonesia AirAsia (IAA) to crystallise the value of AA's investments, which could add an additional 30 sen to 50 sen per share to our valuation. Currently, AA cannot equity account earnings from these associates until accumulated losses amounting to a total of RM252 million have been fully reversed.
AA remains our top sector pick. It is one of the cheapest low-cost carriers, trading at eight times FY11F earnings, a 20% discount to LCC peers and 30% discount to historical average.
Key re-rating catalysts include: (i) Listing of associates ' which will crystallise the value of AA's investments (potentially adds another 30 sen to 50 sen per share to our valuation) and create standalone aircraft financing for TAA and IAA, reducing the strain on AA's balance sheet; (ii) a stronger ringgit; and (iii) an upward trend in ancillary income and yield. ' AmResearch, May 11
This article appeared in The Edge Financial Daily, May 12, 2011.
Company Name: AIRASIA BHD
Research House: AMMB
AirAsia Bhd
(May 11, RM3.15)
Maintain buy at RM3.04 with fair value of RM3.60: We reaffirm our 'buy' rating on AirAsia Bhd (AA) with an unchanged fair value of RM3.60. Our valuation continues to peg AA at 11 times FY11F earnings, a 20% discount to its historical average price-earnings ratio of 14 times.
AirAsia X (a 16%-owned affiliate of AA) announced that its proposed IPO could be delayed to next year instead of the original 2H11. The appointment of advisers has not been finalised yet.
AA had earlier indicated the possibility of divesting its 16% stake in AirAsia X when it goes for listing, thereby potentially realising gains of up to RM230 million or close to 10 sen per share, on our estimates.
Although AirAsia X's IPO could be delayed, note that we have not factored in any potential gains from sale of AA's stake in AirAsia X into our valuation. As such, we do not expect a significant negative impact on the share price as a result of this development.
Also note that we have not yet factored in any incremental value from the listing of AA's 49%-owned associates, Thai AirAsia and Indonesia AirAsia. These associates are scheduled to be listed in 3Q11 and 4Q11, respectively.
We expect the listing of Thai AirAsia (TAA) and Indonesia AirAsia (IAA) to crystallise the value of AA's investments, which could add an additional 30 sen to 50 sen per share to our valuation. Currently, AA cannot equity account earnings from these associates until accumulated losses amounting to a total of RM252 million have been fully reversed.
AA remains our top sector pick. It is one of the cheapest low-cost carriers, trading at eight times FY11F earnings, a 20% discount to LCC peers and 30% discount to historical average.
Key re-rating catalysts include: (i) Listing of associates ' which will crystallise the value of AA's investments (potentially adds another 30 sen to 50 sen per share to our valuation) and create standalone aircraft financing for TAA and IAA, reducing the strain on AA's balance sheet; (ii) a stronger ringgit; and (iii) an upward trend in ancillary income and yield. ' AmResearch, May 11
This article appeared in The Edge Financial Daily, May 12, 2011.
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