• HLIB Institutional Research has a BUY rating on AIRASIA with target price of RM3.10, or 48.3% upside. AIRASIA’s share prices corrected 29.6% from a high of RM2.94 (26 Dec 2014) to a low of RM2.02 (25 May) before ending at RM2.09 yesterday, in anticipation of a positive 1Q15 results on 28 May.
• Currently, AIRASIA is trading at 7.7x FY16 P/E, about 51% discount to its 5-year historical 16x P/E. In term of P/B, AIRASIA is trading at 1.27x P/B, about 23.5% discount to its 5-year his torical 1.66x P/B. HLIB’s BUY rating is premis ed on 1) Sustaining lowest cost LCC operator in Asia with largest network and strong brand name; 2) Low jet fuel price; 3) Increasing ancillary income; and 4) Routes rationalization of major competitor MAS.
• A decisive breakout above RM2.17 will spur prices higher towards RM2.30- 2.40 levels. We believe that selling pressure has been exhausted and gradually resume buying momentum as the “Hammer-like” candles tick pattern on 25 May at the bottom suggests a reversal signal, supported by bottoming up daily oscillators and surging volume of 16m shares (i.e. 142% higher against 1M average of 6.6m shares and 105% above 3M average of 7.8 shares, respectively).
• A decisive breakout above RM2.17 (38.2% FR and 10-d SMA) will spur prices higher to RM2.25 (61.8% FR) and RM2.31 (76.4% FR), with long term target price of RM2.40 (27 Apr high). Immediate supports are RM2.02 and RM1.96 (weekly lower Bollinger Band). Cut loss at RM1.91.

Source: Hong Leong Investment Bank Research - 28 May 2015