AirAsia poised for turnaround
AIRASIA group is on track with its turnaround plans and fund-raising exercise for both the Indonesia and Philippines units, according to Malaysia's Public Invest Research.
It said yesterday that yield was expected to improve towards the end of the year and the low-cost carrier was positive on second-half performance thanks to seasonally stronger quarters and capacity reduction by Malaysia Airlines.
The research house reiterated its “outperform” recommendation for AirAsia, with a target price of 1.88 ringgit (Bt15.80) per share on Bursa Malaysia.
“Our target price implies 98.1 per cent potential upside from the current level,” it said.
“We believe in AirAsia’s future performance based on a positive fare trend, strong growth in ancillary income, lower fuel prices and a strong brand name within the Southeast Asian market,” said the research house.
To recap, Public Invest Research met with the investor-relations team of AirAsia for updates on its operation and outlook for the second half of this year.
Indonesia AirAsia (IAA) is considering the option of issuing non-voting redeemable and convertible preference shares to deal with its negative equity position with the conversion of part of its receivables.
“Nevertheless, the discussions with the existing shareholders is still ongoing, and expected to complete by end of this month.
“Meanwhile, its initial plan to issue new convertible bonds of US$150 million is on track and expected to complete by the end of 2015,” it said.
Public Invest Research also said the board of Philippines AirAsia (PAA) in July approved a new equity injection of 5 billion pesos (Bt3.8 billion) and also agreed on the plans to issue new convertible bonds, for which the term sheets are currently being drafted.
IAA was to remove four or five aircraft from Jakarta, Bandung, Denpasar and Medan starting last month to improve its aircraft utilisation.
To deal with Indonesia’s floor price ruling, IAA targeted to shift about 65 per cent of its capacity to international routes, which have a higher margin than domestic routes.
It will also terminate its unprofitable routes such as Jakarta-Medan and Denpasar Bali-Solo, to minimise its losses.
PAA will be selling two of its older aircraft held by the AirAsia Zest subsidiary and is in discussion for an early return of at least two older lease aircraft to third-party lessors by the end of the year.
To improve its profitability further, PAA is expected to reduce its capacity, primarily from the Cebu hub, and re-deploy it to China routes, which have higher yields.
