6th Sep 2013
KUALA LUMPUR: Affin Research has maintained its “Buy” call on AirAsia with a lowered target price of RM3.60 given its earnings downgrade.
“We continue to like AirAsia’s sound fundamentals, which is backed by its strong operating statistics, as well as the group’s regional growth strategy,” it said in a note on Friday.
Affin said on average, fuel accounts for about 40- 50% of AirAsia’s operating cost.
“We gather that AirAsia has hedged 30% of its financial year 2013 fuel requirement at US$123 per barrel, leaving the remaining 70% at spot price,” it said.
Affin noted fares are most often compromised in order to sustain a high load factor and maintain market share in the face of softer economic growth as well as stiff competition.
“AirAsia’s yields positively correlates to its average fare. In first half 2013, the average fare was RM170, below our financial year 2013 assumption of RM180.
“In view of the recent downward revision in 2013 gross domestic product growth forecast, we lowered our average fare assumption by 3% to between RM175 to RM180 for financial year 2013 to 2015, from RM180 to RM185,” it said.
[Source]
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