MAYBANK Securities has lifted its price target for AirAsia X to RM3.56 from RM3.01 previously while continuing to rate the Malaysia-listed stock at “buy”. 

This comes as Thai AirAsia X is expected to contribute to the group’s earnings for the first time from the third quarter of FY2023, after the airline on Aug 31 announced that the Central Bankruptcy Court of Thailand had approved its business rehabilitation plan. 

The new target price factors in a valuation basis of a price-to-earnings ratio of six times based on FY2024 estimates, versus the previous multiple of 10 times against FY2023 estimates.  

In a report on Sunday (Sep 3), analyst Yin Shao Yang said he expects Thai AirAsia X to boost its parent group’s earnings by more than 40 per cent in the longer term. 

He also noted that the fare environment in Thailand is “more favourable” than in Malaysia based on net profit figures reported in H1 FY2023, when Thai AirAsia X’s core net profit was “much higher” than the parent group’s – which at the time derived its entire revenue from Malaysia AirAsia X. 

As he expects this trend to remain intact in the near term, Yin has raised his core net profit forecast for AirAsia X by 7 per cent in FY2023. 

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The analyst noted that Thai AirAsia X “may not contribute much” to the group’s earnings in Q3, as it has traditionally reported a net loss for this quarter. However, he said the proportion is expected to increase from Q4, as the subsidiary is expected to generate a core net profit then. 

“We note that Thai AirAsia X’s load factors and fares tend to pick up in Q4 due to the year-end holidays. Thus, we believe it is reasonable to expect Thai AirAsia X to generate a core net loss in Q3 FY2023, but generate a core net profit in Q4 FY2023,” he said. 

In future, Yin expects full-year contributions from Thai AirAsia X to substantially improve the group’s overall earnings by 47 per cent in FY2024 and 41 per cent in FY2025. 

These remain “conservative” estimates, in the analyst’s view, as they are based on eight Airbus A330s that Thai AirAsia X currently has in its fleet. The Thai airline has said that it plans to grow its fleet to 17 such planes over the next five years.