KUALA LUMPUR (Feb 4): AirAsia X Bhd shares cut losses at Bursa Malaysia's afternoon break after falling to a record low of 11 sen, while AirAsia Group Bhd settled down 11 sen or 8.59% at RM1.17, as investors evaluated the budget airlines' corporate governance and assessed their business outlook against China's virus outbreak.

Such sentiment resulted in analysts downgrading AirAsia Group and AirAsia X shares.

At 12:30pm today, AirAsia Group registered a volume of some 74 million shares to settle among Bursa's most-active stocks. At RM1.17, AirAsia Group has a market capitalisation of RM3.91 billion.

Meanwhile, AirAsia X shares pared losses to settle down 0.5 sen or 4.17% at 11.5 sen, for a market value of RM477 million.

AirAsia Group's share price extended losses so far today after closing down for the past six trading days.

AirAsia X fell to its record low today after closing at its all-time low of 12 sen yesterday. The stock had closed lower for the past five trading days.

The deferred prosecution agreement entered into by Airbus SE and the UK Serious Fraud Office (SFO) appears to implicate executives of AirAsia.

AirAsia Group and AirAsia X directors Tan Sri Tony Fernandes and Datuk Kamarudin Meranun said in a statement today they categorically deny all allegations of wrongdoing or misconduct on their part as executives and directors of AirAsia with regard to the deferred prosecution agreement.

"We refer to the deferred prosecution agreement entered into by Airbus SE and the SFO on Jan 31, 2020. In return for a suspension of prosecution by the SFO, Airbus has agreed to pay a significant fine and costs to the SFO and also agreed to a statement of facts that appears to implicate executives of AirAsia.

"The investigation by the SFO which reportedly took four years did not even once reach out to us (nor AirAsia, as stated in their press release of Feb 1, 2020) for any explanation or clarification. This is a clear violation of the fundamental legal principle of fairness and access to justice. We categorically deny all allegations of wrongdoing or misconduct on our part as executives and directors of AirAsia.

"Caterham F1, the company alleged to have been sponsored improperly by Airbus, was at the relevant time a Formula 1 Racing team that had gone round the globe promoting amongst others AirAsia, AirAsia X, GE and Airbus. Throughout the period we were shareholders in Caterham, the company made no profits and was eventually disposed [of] for 1 pound sterling in 2014. From start to finish this was a branding exercise and not a venture to make profits," they said.

Analysts downgraded AirAsia Group and AirAsia X shares amid uncertainties from the coronavirus outbreak and Airbus case. MIDF Amanah Investment Bank Bhd analyst Adam Mohamed Rahim wrote in a note today that MIDF adjusted its AirAsia Group share target price to RM1.20 from RM1.86 and downgraded the stock to neutral from buy.

"Our target price is derived via pegging our FY20F EPS of 13.3 sen to a target PER of 9x (previously 14x). We lowered our valuation premised on the ongoing uncertainties from the coronavirus outbreak and Airbus case.

"No changes made to our earnings estimates," Adam said.

Yesterday, Public Investment Bank Bhd analyst Nur Farah Syifaa' Mohamad Fu'ad wrote in a note that Public Investment's target price for AirAsia Group shares was lowered to RM1.21 from RM1.89 previously while the target price for AirAsia X was cut to six sen from 13 sen previously.

Nur Farah Syifaa' said Public Investment is "wary over near-term uncertainties as (we) see temporary weakness in the (aviation) sector".

"Our sector call is cut to underweight, with stock rating on AirAsia (Group) correspondingly cut to trading sell. AirAsia X is kept unchanged at underperform," she said.