KUALA LUMPUR: AirAsia X Bhd’s earnings forecasts for the years ending December 31, 2018 to 2020 have been reduced by Public Investment Bank Bhd amid lower average fare expectations and rising fuel costs.
PublicInvest now imputed higher fuel price assumptions to US$85 per barrel from US$75-80 per barrel previously. This reduced AirAsia X’s earnings forecasts by an average of 73 per cent for FY18-20.
“We maintain our “neutral” call at a lower target price of 23 sen from 35 per share previously based on 10 times to FY19 earnings per share in line with regional low cost carrier averages,” PublicInvest said in a report today following a meeting with AirAsia X’s representatives recently.
The firm said AirAsia X’s cost per average seat kilometre (CASK) in the first-half of 2018 had increased 1.2 per cent year-on-year. This was attributed to higher fuel price and weakening ringgit against the US dollar.
AirAsia X’s average base fare is expected to be depressed due to new route introductions. However, this will be cushioned by improved ancillary income owing to higher number of passengers carried, with targeted load of 83 per cent for the group.
“Fuel hedging remains low at 18 per cent with an average cost of US$72 per barrel in 2018 and up to nine per cent at an average fuel cost of US$89 per barrel in 2019,” PublicInvest said.
It said AirAsia X’s management was targeting average seat km (ASK) growth of about 20 per cent next year, which will be mainly supported by Thailand expansions.
“AirAsia X’s Thailand plans to submit initial public offering applications to the Stock Exchange in February 2019, and expects to be listed by October 2019.
“AirAsia X Thailand is also expected to receive up to four A330ceo aircraft by end-2018, of which one has already been delivered in April 2018,” it noted.
PublicInvest said AirAsia X had been restructuring its routes since last year to phase out its single-routed destination (one city per country) including Tehran (Iran) and Mauritius, and Kathmandu would be discontinued.
The airline also aimed to reinforce its core markets including North Asia (greater China, Japan and Korea) and India.
“However, India currently has bilateral constraints which require operating carriers in India to have at least 20 aircraft before being allowed to fly to international routes.
“AirAsia X’s unit AirAsia India is expected to operate about 20 aircraft by end 2018. Hence, this presents opportunities to the AirAsia Group to expand its routes from India,” PublicInvest said.