KUALA LUMPUR (May 15): AirAsia X Bhd (KL:AAX) fell on Friday while analysts scrambled to cut forecasts after the low-cost airline reported underwhelming first-quarter results.
The net loss was unexpected, and even after stripping out non-recurring items, first-quarter earnings accounted for just 8% of the consensus full-year estimates. Public Investment Bank downgraded AirAsia X to ‘neutral’ while Maybank Investment Bank warned of larger losses in the next quarter.
“We gather that investors may be disappointed by the results but we believe that their focus ought to be on easing jet fuel prices” that could help narrow its losses in the second half, Maybank Investment said and kept the stock on a ‘buy’ call.
Shares of AirAsia X fell as much as four sen or more than 3% to RM1.18 on Friday. While off lows, the stock has lost nearly 40% of its value since the outbreak of the Iran war at the end of February that sent prices of oil and gas soaring.
Prices per barrel of jet fuel, which could account for one-third of an airline’s total operating costs, soared to a high of US$234 (RM923.13) on March 30. For AirAsia X, the additional fuel cost in March alone was around RM200 million.
In response, AirAsia X has raised ticket prices, suspended nearly two dozen routes and reduced its capacity. Jet fuel prices have since eased to around US$150 currently, but that is still around 50% higher than pre-war levels.
Hong Leong Investment Bank, meanwhile, is cutting its target price for AirAsia X by RM1.15 to RM2.20 after slashing its earnings forecasts to account for lower capacity and higher fuel costs.
“We do not expect the war to be a prolonged one,” the house said and kept the stock on a ‘buy’ call, betting that AirAsia X will be able to avoid falling into Practice Note 17 classification.
Post-results, AirAsia X has three ‘buy’, one ‘hold’, and no ‘sell’ calls. The consensus target price is RM1.70 based on the average of the analysts tracked by Bloomberg.