Analysts turn positive on AirAsia, Airports of Thailand on endemic shift

ANALYSTS have turned positive on AirAsia Group and Airports of Thailand (AOT) on the back of a shift to living with endemic Covid-19, as more flights resume and air travel restrictions ease.

DBS Group Research maintained "buy" for AOT and raised its target price to 75 baht, from 70 baht, on Wednesday (Nov 24), a day after UOB Kay Hian upgraded its call on AirAsia to "hold" with a higher target price of RM0.92 from RM0.54.

DBS analyst Nantika Wiangphoem said things at AOT are looking up as it is expected to resume "solid" earnings growth from FY2022, given that global economic activities are expected to resume even as the pandemic drags on.

The state-owned enterprise which operates 6 major airports in Thailand, including Bangkok's Suvarnabhumi and Don Mueang airports, is expected to be a prime beneficiary of potential tourism growth due to the monopolistic nature of its business, she added.

Besides, AOT has a "strong balance sheet with solid expansion plans" and can expect a steady growth of foreign tourist arrivals in the long run given Thailand's status as one of the world's most popular destinations, she pointed out.

She, meanwhile, noted that the counter's potential near-term catalysts include a strong recovery for both domestic and international tourist arrivals and the successful execution of new projects, such as its retail-centric Airport City plan to increase spend at the airport.

As for AirAsia, UOB Kay Hian's analyst Jack Goh believes "the worst is likely to be over" for the Malaysian low-cost carrier after having garnered enough cash flow through various funding exercises.

Other reasons include the region's stellar vaccination milestones, easing of travel restrictions and resumption of flights, which would boost meaningful recovery from Q4 FY2021 onwards, he said.

This was despite AirAsia posting lacklustre results for Q3 FY2021, with a 37 per cent fall in revenue year-on-year to RM118 million (S$38.3 million).

Goh said the results fell below expectations mainly due to stricter lockdown measures in AirAsia's key operating markets, resulting in the airline operating at only 11 per cent of pre-pandemic domestic capacity.

As at 12.29 pm on Wednesday, shares of AOT were trading at 67 baht on the Stock Exchange of Thailand, up 0.25 baht or 0.4 per cent, while AirAsia shares were trading flat at RM1 on the Bursa.