HSBC Global Research: AirAsia Earnings Plans Rise Joint Venture with Domestic Firm to Develop By Domestic Business
October 27, 2011 | Airlines Companies
The earnings of AirAsia, the leading low-cost carrier in Asia is supported by Malaysia’s domestic business, says HSBC Global Research.
In its research note on “Asian Airlines”, HSBC Global Research said AirAsia’s planned listing of joint ventures in Indonesia and Thailand, will help reduce strain on the balance sheet.
“The prospects of contributions from joint ventures listing is rising,” it added.
On the risk side, HSBC Global Research said a strengthening of the US dollar versus the ringgit, will negatively impact business.
“Earnings are sensitive to a further rise in fuel prices,” it added.
HSBC Global Research has a overweight call on AirAsia.
On the airline industry, HSBC Global Research said economic uncertainties and collapsing share prices, normally signal the best time to revisit the Asian airlines.
“Timing the cycle will be more complicated than in the first quarter of 2009, but similar valuations suggest stocks are attractive,” it added.
The focus of HSBC Global Research was on Asian premium carriers, namely Cathay Pacific Airways and Singapore Airlines.
It has upgraded Cathay Pacific to an overweight from neutral amid its strong home base, which is the best positioned gateway into southern China, while the weakening Hong Kong dollar should provide a superior medium-term outlook.
HSBC Global Research also upgraded Singapore Airlines to neutral from underweight as it believes the airline will remain profitable over the next year due to its strong brand and high margin at home.
