KUALA LUMPUR (Nov 20): Shares of low-cost carrier AirAsia Bhd hit a low of RM2.38 in morning trades after posting poor financials for its third quarter ended Sept 30.
At 10.33 a.m today, AirAsia fell four sen, or 1.6% to RM2.42. Yesterday, Air Asia reported 3Q net profit shrunk 85% to RM5.4 million due mainly to the loss of RM17.2 million by its associate companies.
Selling pressure on its long haul affiliate AirAsia X Bhd (AAX) has somewhat eased this morning after its share price plunged to a low of 64.5 sen yesterday after the airline reported a fourth consecutive quarter loss of RM210.85 million.
AirAsia X recouped 1 sen or 1.6% to 65.5 sen as at 10.33 am.
Despite the poorer set of results from the Air Asia group, analysts see a ray of hope on the horizon against the backdrop of falling jet fuel, which would help ease cost pressure on the two low-cost carriers.
But AAX’s massive loss once again raises question on the viability of the long haul low-cost carrier model.
In a research note yesterday, Affin Hwang Capital maintained its "buy" call on AirAsia with an unchanged target price of RM2.80, saying the outlook for the low cost carrier is poised to improve against declining jet fuel price trend, and the anticipation of less fare dumping activity by year-end.
“Although AirAsia’s nine months ended Sep 30, 2014 (9MFY14) core net profit of RM429 million only accounted for 69% of our full year estimate, we deem it to be within expectations as 3Q is seasonally weaker and we expect earnings to pick up in 4Q due to seasonality. Our definition of core net profit excludes deferred tax gain of RM114 million and foreign exchange gain of RM83 million,”said Affin Hwang in its note.
On AAX, PublicInvest Research maintained its "neutral" call on the stock, amid uncertainty over the restructuring plans for Malaysian Airline System Bhd (MAS).
“The pressure on fare may still possibly affect AAX earnings for FY14-FY16. We lower our target price to 69 sen after cutting our earnings to reflect the overall group’s weaker performance,” said PublicInvest in its note today.