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KUALA LUMPUR (March 30): Ongoing travel restrictions and uncertainty about the Covid-19 situation are key concerns for analysts tracking low-cost carrier AirAsia Group Bhd when assessing the likelihood of recovery for the eastern carrier. anus.
According to MIDF Research, although the recovery of the aviation and air travel sector is expected to occur gradually in 2021, it remains an uphill battle for AirAsia as it is struggling financially to stay afloat in the current pandemic-laden operating environment. .
MIDF, Hong Leong Investment Bank (HLIB) and AmInvestment Bank maintained their “sell” rating on the shares, while Kenanga Research maintained its “underperforming” rating.
The airline reported a net loss of RM5.1 billion or RM1.52 per share for the financial year ended December 31, 2020 (FY20), widening from a net loss of RM315.81 million for the previous year. This was also 66% wider than the consensus estimate of 92 sen / share.
Full-year results reflected a higher-than-expected net loss of RM2,440 million for the fourth quarter ended December 31, 2020 (4QFY20) after AirAsia recorded a series of impairments.
“Fiscal year 20 was devastating for AirAsia, as the group was forced to operate at minimal capacity due to the motion control order (MCO) that severely limited domestic and international travel, which continues today.” MIDF said.
Interestingly, while MIDF lowered its price target (TP) for AirAsia to 21 sen from 37 sen previously, the other research houses raised theirs.
HLIB now has a higher TP of 90 sen from 37 before after it increased its price-earnings (P / E) to five times AirAsia’s earnings per share (EPS) for fiscal year 22, while Kenanga raised its TP at 70 sen from 38 sen, also at higher EPS estimates.
AmInvestment, meanwhile, revised its fair value (FV) slightly up to 63 sen from 62 sen previously to adjust a 3% premium to reflect a four-star Environmental, Social and Governance (ESG) rating for AirAsia as assessed. from the bank. , He said.
“We expect AirAsia to face a difficult operating environment for the next two to three quarters, derailed by the still widespread travel disruptions due to Covid-19. However, the availability of vaccines has renewed optimism for air travel to return to normal sooner than expected, ”Kenanga wrote in a note today.
AirAsia’s negative equity position is also a matter of concern to analysts. For fiscal year 2020, AirAsia recorded a negative book value of RM3.6 billion.
The airline completed two private placement tranches during the first quarter of the year, raising RM336 million. This was part of their plans to raise RM2 billion to RM2.5 billion in a combination of debt and equity financing to ensure sufficient liquidity for the group, he said.
“We believe that it is very critical for AirAsia to shore up its liquidity quickly given its cash burn rate. [which] we estimate around RM350 million a month, ”AmInvestment said in a note.
He said that depending on how soon Malaysia and the wider world emerge from the Covid-19 pandemic, AirAsia may need to raise more fresh capital, potentially including a debt-for-equity swap for creditors to ensure its long-term survival.
Shares of AirAsia, which fell as much as seven sen or 6.19% to RM1.06 today, closed at RM1.07 at the close of the market, still below six sen or 5.31%, for a market capitalization of RM4.08 billion. He saw 69.85 million shares traded.
Read also:
AirAsia posts a broader-than-expected Q4 net loss of RM2.4b
AirAsia Group Falls After Reporting FY20 Net Loss at RM5.1b
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