AirAsia; Hold
Price Target: RM2.90; AIRA MK

AirAsia entered into agreements to subscribe for a 49% stake in AirAsia India Private Limited (AI) for US$14.7m (RM44.6m). Tata Sons Limited (TSL) and Telestra Tradeplace Private Limited (Telestra) will hold 30% and 21% respectively in AI. AI plans to operate from Chennai, Tamil Nadu to focus on the Southern India market. Subject to obtaining the relevant regulatory approvals, AI is scheduled to commence operations in September 2013.

In the near-term, we could see marginal losses from start-up costs in 2013 and 2014. However, we are conceptually positive on the longer term prospects given the potential from applying AirAsia’s successful low cost model on India’s large population and underserved segments. Risks include competition from other domestic carriers and high operating costs. Fuel and airport related charges are higher in India than other regions. We maintain Hold on AirAsia with a RM2.90 TP.

Source: HwangDBS Research - 19 Apr 2013