Low-cost medium-haul carrier AirAsia X’s (AAX) 3Q15 operating statistics were uninspiring and showcase that management still has much to do in its effort to turnaround the group, says Maybank Investment Bank Research.
It said on Monday that passenger traffic shrank by 13.6% on-year due to capacity cuts and a drop in seat load factor to 75.1% (-5.5 percentage points on-year).
“This is a stark contrast against the industry whereby many airlines enjoyed record high load factors and strong traffic growth,” it said.
Maybank Research pointed out the 3Q15 results to be released on Nov 25 would not inspire much confidence in the stock and may exacerbate concerns over management’s ability to turn the group around.
“Nevertheless, we believe that many of the initiatives undertaken are fitting, and will probably begin to yield benefits in 4Q15,” it said.
The research house said the third quarter is seasonally a low period and AAX has produced losses before, even during the good times.
However, Maybank Research expects some noteworthy improvement on a year-on-year and quarter-on-quarter basis due to the benefit of lower fuel price and management’s capacity cuts on the weak routes.
“We forecast a core net loss of RM62.6mil, which is a 66% improvement on-year. This would lift 9M15 core net loss to RM233.5mil (-43% on-year), which is in line with our full year loss estimate of RM204.5mil.
“Generally we are negative on the stock as we think the risk-reward is not attractive. However, the stock is trading at just 0.86 times price-to-book value (P/BV) which suggests limited downside. Maintain Hod, with an unchanged target price of 21 sen based on 1.0 times FY16 P/BV,” it said.
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