Update AirAsia X most active on debut

Update AirAsia X most active on debut
Business & Markets 2013
Written by Surin Murugiah of theedgemalaysia.com
Wednesday, 10 July 2013 09:05

KUALA LUMPUR (July 10): AirAsia X Bhd (AAX) was the most actively traded counter on its debut on the Main Market of Bursa Malaysia Securities on Wednesday.

At 9am, the stock rose one sen to RM1.26 with 12 million shares done.

Affin IB Research on Tuesday had initiated coverage on AAX with an Add rating and a target price of RM1.40.

The research house said its valuation was based on PER multiple of 13.5x CY14 EPS which is tagged at a 25% premium to regional LCC average PER of 10.8x.

This also implies a P/BV valuation of 1.8x, it said.

“We believe the premium is justifiable in view of AAX’s; i) first mover advantage against its direct competitors; ii) competitiveness in terms of cost – operates the lowest CASK compared to its peers, suggesting better agility to establish in a tough operating environment; iii) strong growth prospects in the pipeline – FY12-15E EPS CAGR of 104%; and iv) strong established branding across Asia Pacific as well as strong feeder network.

“Based on our target price, the stock offers a 12% upside from its IPO price of RM1.25. Amongst the key risks include; i) the volatility of jet fuel price – c.51% of AAX’s operating cost; ii) stiff competition from both low cost and full service airlines, which could lead to lower average fare and hence compromise yields,” it said.