Research firms maintain 'buy' call on AirAsia

Most research houses have maintained their "buy" call on AirAsia Bhd (5099) after the low-cost carrier (LCC) announced sterling full-year results.

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ECMLibra Investment Research has raised its target price of AirAsia's shares to RM4.15 from RM3.30 previously, while AmResearch Sdn Bhd believes RM3.60 would be its fair value.

OSK Research Sdn Bhd, meanwhile, has reaffirmed its RM3.86 target price after AirAsia reported a net profit of slightly over RM1 billion for the year ended December 2010.

ECMLibra said AirAsia's fourth quarter 2010 core earnings of RM341.3 million, which edged up 100 per cent year-on-year, were within its expectations.

"For the full year, the group's core earnings grew a whopping 84 per cent year-on-year to RM825.1 million. This was also in line with our's and the market's expectations," it said yesterday.
ECMLibra remains optimistic on AirAsia's prospects in 2011, especially on the listing of its associates and AirAsia X, as well as its new venture in the Philippines.

"We have tweaked its FY11-FY12 forecasts by 24 per cent to 22 per cent to factor in higher ancillary income and average fare, and raised assumptions of WTI from US$80 (RM244) per barrel to US$90 (RM274.5) per barrel.

"Hence, our target price is increased to RM4.15 (previously RM3.50) pegged against 10x FY11 EPS (earnings per share)," it explained.

OSK Research said the RM874 million core net profit was also in line with its forecast of RM904 million. It has left its earnings forecast intact.

"However, over the immediate term, we believe that its share price will continue to be pressured in view of the global volatility caused by the current Middle East turmoil and AirAsia's high foreign ownership."

OSK Research also noted that the aviation cycle had in recent years shortened, with the timing of exit and entry being a crucial factor.

AmResearch said its projections on AirAsia had been raised following stronger-than-expected 4Q10 results.

"We continue to peg AirAsia at 11x FY11 earnings forecast."

AirAsia, the firm noted, remains its top sector pick.

"The recent share price retracement provides opportunity to buy on dips. It is one of the cheapest LCCs, trading at 7x FY11F earnings at a 40 per cent discount to LCC peers and a 50 per cent discount to historical average," AmResearch explains.