Brokers' take: CGS-CIMB lowers target price for AirAsia on deeper forecast loss

CGS-CIMB lowered its target price for AirAsia Group Berhad to RM0.05 from RM0.08 previously, while maintaining its "reduce" call, on expectations that the airline will perform worse than predicted this year.

In a Tuesday report, the brokerage noted its forecast FY2021's net loss to be double that of consensus, after AirAsia's FY2020 core loss summed to 21 per cent worse than consensus expectations.

Analyst Raymond Yap also expects the company's core net loss for Q1 FY2021 to be "as bad or worse" than that of Q4 FY2020, which saw a RM1.1 billion (S$356.6 million) loss, mainly due to interstate travel restrictions reimposed earlier this year.

That being said, AirAsia's FY2020 net loss was 6 per cent narrower than CGS-CIMB's forecast net loss, which the brokerage credited to forex translation and derivative gains. However, CGS-CIMB believes this year's first quarter will suffer from forex translation losses due to the stronger US dollar versus ringgit.

The brokerage also noted that AirAsia has at least RM1.5 billion in deferred aircraft leases, and will raise RM2 billion to RM2.5 billion in new equity and debt capital this year.

After deducting forecast operating losses, including the private placement, and assuming RM1 billion rights issue and RM2 billion value accretion, CGS-CIMB came to a forecast book value per share of 0.5 sen for FY2021.

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