KUALA LUMPUR (April 7): CGS-CIMB Research has maintained its “Reduce” rating on AirAsia Group Bhd (AAGB) at 81 sen with a lower target price of 60 sen (from 85 sen) and said since its last update on Feb 28, Malaysia has imposed the Movement Control Order and AAGB has cancelled almost all of its flights.
In a note April 6, the research house said it has hence slashed forecasts materially.
“We estimate that AAGB’s total monthly cash burn rate may be around RM527 million, with (1) fixed cash operating costs of RM192 million/month, after assuming a 32% cut to the run rate of RM283 million/month in FY19; (2) cash costs for operating lease instalments and financing expenses of RM258 million/month; and (3) fuel hedging losses of RM77 million/month, using US$35/bbl Brent as the average spot price for the rest of the year.
“AAGB had a cash balance of RM2.6 billion at end-2019, including RM1.2 billion of sales in advance of carriage.
“Assuming 20% of the sales in advance of carriage is refunded, due to AAGB’s many flight cancellations, then the remaining cash balance of RM2.4 billion can pay for AAGB’s fixed costs for less than five months under the current conditions.
CGS-CIMB said it calculated that AAGB’s cash balance can pay its fixed costs for less than five months, requiring it to get new funding or defer its payments to suppliers.
“Reiterate Reduce, with a lower target price of 60 sen due to earnings cuts, still based on P/BV of 0.73x (2 s.d. below the mean since 2013),” it said.
http://www.theedgemarkets.com/article/cgscimb-research-urgent-intervention-needed-save-airasia
