KUALA LUMPUR, Malaysia (July 8): Although the aviation sector and air travel are likely to progressively improve in 2021, AirAsia Group Bhd faces an uphill battle to stay afloat in the present pandemic-plagued operational climate. MIDF Investment reiterated its “sell” rating on AirAsia Group in a research note issued today, citing key risks including a faster-than-expected recovery in travel demand, a worsening pandemic, a tougher Movement Control Order imposed on air travel, as well as a new round of equity funding.
“We believe its recent share price has surpassed the level of valuation that we believe is appropriate for the company in light of the current situation.
“We are optimistic about the aviation recovery,” it stated, “but we must remain realistic in gauging the viability of the recovery.”
While the path taken appears cautious, the investment bank viewed it as prudent and appropriate at a time when the positive feeling that has boosted the stock prices of aviation companies may be overstated, given the recent rise in new Covid-19 cases.
Meanwhile, AirAsia Group stated on Wednesday that its digital branch, AirAsia Digital, has proposed to buy Gojek’s Thai operations for US$50 million, which would be funded through a share issuance, giving the sellers a 4.76 percent ownership in AirAsia SuperApp Sdn Bhd.
Bank Negara Malaysia and Bank of Thailand must both approve the proposed acquisition, which is anticipated to close in the fourth quarter of this year.
AirAsia Group’s digital business, according to MIDF Investment, is still in its infancy and is a different ballgame entirely.
“We believe that the digital section of the AirAsia Group is not yet self-sustaining and is still operating at a scale that will not be able to sustain the entire group in the near future.
“Right present, the company’s existence is dependent on the group’s fundraising efforts and the revival of its primary business — airlines,” it continued.
AirAsia Group will stay in a dangerous situation, according to MIDF Investment, if it fails to adequately handle the immediate needs of its airline industry.
At 10.25 a.m., AirAsia Group’s stock was unchanged at 89.5 sen./n
