Hot Stock AirAsia gains 1.80% on positive outlook, higher target price

by **Cals** Wed 18 May 2016, 01:53

Hot Stock

[size=28]AirAsia gains 1.80% on positive outlook, higher target price

By Surin Murugiah / theedgemarkets.com | May 17, 2016 : 9:47 AM MYT

KUALA LUMPUR (May 17): Shares of AirAsia Bhd rose 1.80% after Hong Leong IB Research (HLIB) maintained its “Buy” rating on AirAsia with a higher target price of RM2.60 (from RM2.14) after imputing higher earnings.
At 9.27am, AirAsia rose 4 sen to RM2.26 with 4.77 million shares done.
In a note today, the research house said AirAsia’s 1Q16 to record strong earnings.
It said recent developments included:
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Jet fuel price has dropped to US$55/bbl. Beneficial to AirAsia for jet fuel cost contributed 40-50% of operational cost. AirAsia hedged 76% of 2016 jet fuel at US$54/bbl, potentially average cost at US$55/bbl for FY16 (-30% yoy), vs. HLIB’s assumption of US$60/bbl and consensus US$60-80/bbl.
The weak RM has strengthened back to RM4-4.10/US$, while we expect RM/US$ to be stable and sustain at current until year end (+2-5% yoy for FY16), relatively immaterial to 30% drop in jet fuel costs.
Reported strong 1Q16 statistic with record high load factor of 84.8% for the group, indicating strong yields in the quarter.

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The research house said that overall, it expects 1Q16 to report core earnings of RM250 million-RM300 million (excluding contribution from IAA, PAA and AAI) versus HLIB’s RM1 billion and consensus versus HLIB’s RM1 billion and consensus RM813 million for FY16.
“Uphold Buy recommendation with higher target price of RM2.60 (from RM2.14), after imputing higher earnings,” it said.

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