Analysts Have Mixed Views on AirAsia’s 2017 First Half Performance

31st Aug 2017

It seems that analysts cannot agree on the Malaysia AirAsia corporate and earnings performance for the first half of 2017.

PublicInvest Research, for instance, maintained a “neutral” call on AirAsia, with a price target of RM3.19.

In a statement, PublicInvest Research said:

Upon completion, there will be no significant changes to the effective shareholdings in IAA by AirAsia, which is up to 48.4% (currently holding 49% of IAA). In addition, there will be a total one-off gain of about RM230.4 million in FY17, owing to reversal of IAA’s impairment in AAB of RM207.5 million, as well as forex gain of RM22.9 million, this however subject to approvals be given for the transaction. We view the listing as positive as it should provide financial flexibility to IAA to pursue growth.

The research house added:

We understand that IAA is participating in the Indonesia Tax Amnesty Programme, which IAA will no longer be liable for any tax liability prior to FY16, whilst the existing deferred tax asset in IAA’s book prior to FY16 will also no longer be deductible against future profits.

On the other hand, HLIB Research maintained a “buy” call on the company’s shares at a price target of RM4.10. This research house speculates that AirAsia will have stronger earnings in the second half of the year. HLIB also expects a stronger yield factor in the second half of 2017 on the back of strong demand and sustainable yields.

The research house added that it does not believe that the corporate exercise will have that much of an impact on the group’s earnings or shareholdings. The exercise is currently waiting for approval by regulators and shareholders and should be completed in Q1 FY2018.

The two research houses also couldn’t agree on AirAsia’s core net profit. While PublicInvest has it at RM775.70 million, HLIB Research says the number is at RM667.60 million.

The low cost carrier reported a drop of 53% in net profit for the second quarter of the year. According to AirAsia the net profit for this period was at RM139.9 million, while last year it was RM298.3 million. The main reason for the drop, says the airline, is the deferred tax charge.

AirAsia also reported revenue of RM2.38 billion, an increase from RM1.99 billion in Q2 2016.