Malaysia's AirAsia kept 'sell' on demanding valuations - Citigroup
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(XFN-ASIA) Citigroup maintained its sell/high risk rating on AirAsia Bhd with a target price of USD0.48 citing rich valuations, slowing growth in overseas operations and high foreign shareholdings as key reasons that investors should take profit.
Citigroup analyst, Corrine Png, said AirAsia's performance in financial year 2007 is expected to come in within the expected range.
"We expect AirAsia to meet our 2007 recurring profit forecast of MYR198 million (USD57.2 million) or a reported profit of MYR400 million (USD115.6 million) if the Malaysian Accounting Standards Board approves the inclusion of deferred tax credits in its audited accounts," said Png.
AirAsia's domestic operations are doing well so far with its market share growing to 50%, up from 30% in 2006, according to Png. "Traffic growth has moderated in recent months, but this is expected given the larger base," Png said.
AirAsia's plans to launch new routes, including those to China's Shenzhen and Macau, should also help boost growth. In addition, the recently-approved lower passenger service charges at the low-cost terminal will also help in terms of keeping costs down, Png added.
But these positive developments have partly been overshadowed by the carrier's slowing growth in overseas joint ventures, Thai and Indonesia AirAsia, and unhedged fuel requirement from Jul- 07, said Png. "Risks are on the down side," she said.
Date posted: 25-Jun-07
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Malaysia's AirAsia kept 'sell' on demanding valuations - Citigroup 
