KUALA LUMPUR: PublicInvest Research has issued an outperform call on AirAsia X Bhd (AAX) with a target price of 53 sen as FY2017 is seen as a good year for the low-cost, long haul airline.
"We believe the positive performance will flow through from FY17 onwards as a result of better cost efficiencies through improvement in aircraft utilisation and increase in route frequencies; improved performance from associates; less impact from fuel price volatility; and lower net gearing," explained PublicInvest Research.
The research house, however, noted that in terms of capacity expansion, the AAX fleet will remain unchanged as there is no new aircraft delivery expected this year.
As a result, AAX will be in a net cash position in FY18, but this is likely to reverse into net debt again once aircraft deliveries are back on track from FY19 onwards, PublicInvest Research said.
On a positive note, AAX is expected to increase its average seat km (ASK) through better aircraft utilisation and increase its frequencies of current routes by strengthening operations in key markets like China and Australia.
The firm is also positive on AAX's new Honolulu route, through Osaka, which is expected to be launched in June this year.
Additionally, on AAX's Indonesian unit IAAX services, which have been temporarily suspended since September 2016, PublicInvest Research made note of its two aircraft being temporarily wet-leased to Malaysia AirAsia (MAA).
"We understand that it has already submitted plans to resume its operations, probably by early 2H2017 and currently waiting for approval of new routes; with its route strategy to be towards North Asian and Indian market," said the firm.