Stock Name: AIRASIA
Company Name: AIRASIA BHD
Transport sector
Upgrade to neutral: The International Air Transport Association (IATA) projects that the global airline industry will register substantially lower profits of US$4 billion (RM12.08 billion) in 2011 against US$18 billion in 2010 on the back of travel disruptions arising from the natural disasters in Japan and unrest in the Middle East and North Africa and high oil prices.
Malaysian Airline System Bhd (MAS) and AirAsia Bhd are vulnerable to the high crude oil prices given their limited fuel hedging. MAS has only hedged forward 25% of its FY11 ending December fuel requirement at US$93 per barrel (bbl) West Texas Intermediate (WTI). Similarly, AirAsia has only hedged forward 17% of its group fuel requirement for 2HFY11 ending December at effective average prices of US$124 per bbl Jet and US$115 per bbl Brent.
We envisage ever more crowded skies over the next three to five years on the back of Firefly's plan to expand its fleet of B737-800 10-fold from three at present to 30 by 2015. Firefly's equally fuel efficient 189-seater Next Generation B737-800 aircraft will give AirAsia's 180-seater A320 aircraft a run for their money.
We are raising FY12/FY13 net profit forecasts of MAS by three times and 1.3 times, having moderated our jet fuel price assumption to US$115 to US$120 per bbl from US$120 to US$125 per bbl previously.
Risks to our view include: (i) A lower-than-expected rise in yields; (ii) Higher jet fuel cost; and (iii) Inability to contain outbreaks of pandemic diseases.
We are raising indicative fair value of MAS by 6% to RM1.68 from RM1.58 previously and AirAsia by 8% to RM3.44 from RM3.18. We are also raising our rating on the transport sector to 'neutral' from 'underweight' on the back of our recent upgrade of MAS and AirAsia to 'market perform' from 'underperform'. ' RHB Research, June 30
This article appeared in The Edge Financial Daily, July 1, 2011.
Company Name: AIRASIA BHD
| Research House: RHB | Price Call: HOLD | Target Price: 3.44 |
Transport sector
Upgrade to neutral: The International Air Transport Association (IATA) projects that the global airline industry will register substantially lower profits of US$4 billion (RM12.08 billion) in 2011 against US$18 billion in 2010 on the back of travel disruptions arising from the natural disasters in Japan and unrest in the Middle East and North Africa and high oil prices.
Malaysian Airline System Bhd (MAS) and AirAsia Bhd are vulnerable to the high crude oil prices given their limited fuel hedging. MAS has only hedged forward 25% of its FY11 ending December fuel requirement at US$93 per barrel (bbl) West Texas Intermediate (WTI). Similarly, AirAsia has only hedged forward 17% of its group fuel requirement for 2HFY11 ending December at effective average prices of US$124 per bbl Jet and US$115 per bbl Brent.
We envisage ever more crowded skies over the next three to five years on the back of Firefly's plan to expand its fleet of B737-800 10-fold from three at present to 30 by 2015. Firefly's equally fuel efficient 189-seater Next Generation B737-800 aircraft will give AirAsia's 180-seater A320 aircraft a run for their money.
We are raising FY12/FY13 net profit forecasts of MAS by three times and 1.3 times, having moderated our jet fuel price assumption to US$115 to US$120 per bbl from US$120 to US$125 per bbl previously.
Risks to our view include: (i) A lower-than-expected rise in yields; (ii) Higher jet fuel cost; and (iii) Inability to contain outbreaks of pandemic diseases.
We are raising indicative fair value of MAS by 6% to RM1.68 from RM1.58 previously and AirAsia by 8% to RM3.44 from RM3.18. We are also raising our rating on the transport sector to 'neutral' from 'underweight' on the back of our recent upgrade of MAS and AirAsia to 'market perform' from 'underperform'. ' RHB Research, June 30
This article appeared in The Edge Financial Daily, July 1, 2011.
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