OSK Research Sdn Bhd has downgraded AirAsia Bhd's (5099)call to "neutral" due to the deferred delivery of seven Airbus A320 to 2015.
"Due to the limited upside, we downgraded the company from "buy" before," it said.
The research house said as the first half comes to a close, it rolls over its valuation parameters to reflect financial year 2011 earnings to derive a higher target price of RM1.60.
OSK said its valuation is derived from nine times financial year 2011 earnings per share.
"This implies a price/book value of 1.05 times based on financial year 2011 book value, which is slightly higher than the long-term average of 0.90 times, given its high net gearing," the research house said.
With the deferment, the delivery of aircraft in 2011 will be reduced to eight planes from the original 15. Also, the number of aircraft delivery in 2015 will increase to nine from the planned two.
As the latest development will not affect the delivery schedule for 2010, OSK said it will continue to stick to its original revenue passenger kilometre growth assumption for 2010.
"For 2011, we maintain a fairly conservative assumption, anticipating available seat kilometres and revenue passenger kilometres to grow by 8.3 per cent and 9.8 per cent respectively," it said.