AirAsia: Buy, target price RM3.10
AmResearch kept its "buy" call on budget airline AirAsia Bhd's (5099)stock, but said its fair value of RM3.10 a share is under a review with an upward bias.
The research firm noted recent newswire reports that AirAsia plans to list its Thai unit, Thai AirAsia, within the third quarter of this year.
Air Asia has also been targeting to list its Indonesian associate, Indonesia AirAsia (IAA) , this year.
"We believe AirAsia could be looking to raise between US$300 million and US$500 million (RM912 million and RM1.52 billion) for each associate from the respective listings," the research house said in a note to clients yesterday.
The listing of its associate in Indonesia is facing "minor hur-dles" as a new ruling by the In-donesian government requires airlines in that country to have on-balance sheet financing of at least five aircraft by 2012.
"Currently, all aircraft operated by IAA are on operating leases from AirAsia. What this means is that the transfer of aircraft debt to IAA could be accelerated to meet Indonesian regulation deadline," AmResearch said.
AirAsia remained the research firm's top pick in the sector. It last traded at RM2.70.
AmResearch said key catalysts for the stock in the near-term could be a strong fourth quarter 2010 results (to be announced next month), a stronger ringgit and the listing of its associates, which could potentially add another 30 sen to 50 sen to its valuation.
It also noted that the listings would create standalone aircraft financing for IAA and Thai AirAsia, reducing the strain on AirAsia's balance sheet.