AirAsia extends gains in early trade

KUALA LUMPUR: AIRASIA BHD [] extended its gains in early trade on Monday, June 27 and was up eight sen to RM3.37 at 9.20am

The stock has been on an uptrend trajectory since it ordered 200 Airbus A320-NEOs (with an option to purchase a further 100 aircraft) last week.

Delivery of the A320-NEOs, which offers 15% fuel cost savings, is expected to start from 2016.

Credit Suisse Research on June 24 had said the orders were for AirAsia’s long-term growth, including the new ventures in the Philippines and Vietnam. It also expected the large scale order at such an early stage of the aircraft development, would enable AirAsia to enjoy significant discounts over the list price of the aircraft.

It pointed out the orders were also part of AirAsia’s fleet renewal programme. By 2016, AirAsia would have 16 aircraft that are 10 years old and over, with a further 19 aircraft to hit the 10-year mark in 2017.

“We expect AirAsia to maintain a young fleet (lower maintenance cost), thus will dispose of older aircraft to crystalise the gains from the large discounts enjoyed from its A320-200 order,” it said.

The research house said it did not factor the impact of the A320-NEO order, as deliveries are only expected to start in 2016.

“We remain positive on AirAsia and reiterate our OUTPERFORM rating on the stock and RM4.80 target price,” it said.