Thu08282014

LAST_UPDATEThu, 28 Aug 2014 1am

AirAsia Unscathed By Termination Of JV With ANA

PETALING JAYA: The termination of the joint venture (JV) between AirAsia Bhd and ANA Holdings Inc, although not unexpected, will not adversely impact the former, given that losses will be minimal.

Although not surprise by the failure of the JV, analysts pointed out that this would be the best possible outcome as otherwise, AirAsia would have to bear losses stemming from the operations for a period.

CIMB Investment Bank Bhd analyst Raymond Yap said in a report that the withrawal showed that the AirAsia management was not afraid to make tough choices.

“AirAsia’s short history has shown us that it will fight hard to win, but when withdrawal is the better option, it will not hesitate to do so. In our view, this is the mark of great corporate leadership,” he said.

Yap, who previously estimated that AirAsia would have to bear between RM30mil and RM40mil from its share of AirAsia Japan’s losses in the 2014 to 2015 period in the second quarter, said these losses would now be reassigned to AirAsia India, due to start at the end of the year.

He has maintained an outperform call on AirAsia’s stock with a target price of RM4.

Meanwhile, Alliance Research analyst Angeline Chin, who reiterates her buy call on the stock with a target of RM4.20, views AirAsia’s exit positively because given the tough operating environment, AirAsia Japan may not turnaround in the near future.

“On the other hand, management highlights that AirAsia may re-enter the Japanese market in the future and it has already been approached by potential partners,” she said, adding that the low-cost carrier model remained resilient in a growing Asean market place.

Affin Investment Bank Bhd analyst Sharifah Farah, who has also maintained a buy call on the stock with a target price of RM3.90,

said while disappointing, the failed JV would just be a mere dampener to the airline’s regional expansion plans.

“Going forward, we believe AirAsia will continue to court new partners in Japan to leverage on the potential of the region,” she said.

AirAsia closed three sen up at RM3.06.

 

 

- The Star

http://biz.thestar.com.my/news/story.asp?file=/2013/6/27/business/13294017&sec=business