Brokers’ take: Maybank re-initiates coverage on AirAsia X with ‘buy’, forecasts record net profit

MAYBANK Securities has resumed coverage on Malaysia-listed AirAsia X (AAX) with a “buy” call and a price target of RM3.58, as it expects the low-cost airline to be even more profitable than it was pre-Covid.

In a report on Wednesday (Jul 26), analyst Yin Shao Yang forecast AAX to deliver record core net profits of RM160 million (S$46.8 million) for FY2023 and RM256.5 million for FY2024. 

This comes amid the post-Covid environment of falling aircraft lease rates as well as rising unit passenger fares, said Yin. He also highlighted that the airline is now effectively debt-free following a debt-restructuring exercise. 

The analyst is expecting AAX’s “Practice Note 17” (PN17) listed issuer status to be lifted, given its recent consecutive quarters of profits as well as its positive shareholder equity position. The PN17 status is issued by Bursa Malaysia to issuers in financial distress. 

This – along with AAX’s potential acquisition of Capital A’s four short-haul airlines in exchange for new AAX shares – will put the company in a good position to negotiate for more favourable terms. Yin added that AAX is “in a position to ensure that the acquisition is EPS (earnings per share) accretive”.

Noting investors’ concerns that the number of shares issued to Capital A through the acquisition would dilute existing shareholder interests, Yin said AAX is “likely to be an associate, not a subsidiary of Capital A”.

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“According to our calculations, AAX could issue 317.6 million new shares or 71 per cent of its existing number of shares to Capital A for the latter to raise its ownership of the former to 49 per cent but in the process, AAX’s core net profit will triple,” he noted.

The analyst also flagged more potential upside from AAX’s 49 per cent-owned subsidiary, Thai AirAsia X, as it enters into a rehabilitation plan with creditors. 

This could allow AAX to resume its recognition of share of profits for Thai AirAsiaX, which would also provide an additional boost to the group’s overall balance sheet, he said. 

As at 3.49pm on Thursday, shares of AAX on the Kuala Lumpur Stock Exchange were up by RM0.47 or 26.1 per cent at RM2.27.