Airasia: By JP Morgan …
It has soared 127% till Sept 16 2016 since 2016 as its Malaysian operation improved and after the airline said it would sell a majority stake in its leasing arm AAC.
It issue a a sell rating and 2.50 Malaysian ringgit per share price target.
It believes that share price performance is now (16 Sept 2016) more at risk due as its key associates – Indonesia Air Asia and Philippines AirAsia – remain loss-making at the operating level, increased competitive intensity in each of its markets (restructured Thai Air in Thailand, Lion Air in Indonesia, Cebu Air & Philippine Airlines in Philippines and Jet Airways, Indigo & SpiceJet in India), sale of majority stake in Asia Aviation Capital (AAC) could result in a net reduction of earnings estimates, potential unanticipated FX losses in 2H16 and downside risks to consensus expectations.
JP Morgan’s price target of M$2.50 implies 7 times their forward EBITDAR estimates, in line with AirAsia’s average valuation since 2014. It believes it is more reasonable to value AirAsia at 7x until it sees a more sustained recovery in operating profitability at its associates.
