AirAsia; Hold; RM3.03
Price Target: RM2.90; AIRA MK

AirAsia announced that it is terminating the JV with ANA Holdings Inc in Japan. Since its launch the Japan JV has faced issues ranging from different shareholder opinions on how the business should be managed to where the domestic business operations should be based. ANA will be acquiring AirAsia’s 49% stake in AirAsia Japan (AAJ) for RM80.5m.

The development is positive in the medium term, as we assumed that AAJ would have continued making losses in 2013 and 2014. However, the termination would not result in a higher forecast, given that the amount of losses has already exceeded the Group’s investment in AAJ.

With the effective date for transfer of shares by end this week, the Group will cease to be shareholder in the Japan operations. Cost for remaining flights that have already been booked until 1 Nov 2013 would be carried by ANA. In the longer term, the Group remains keen on the Japan market and could return with a different partner.

We maintain our Hold call and RM2.90 TP, based on 9x FY14F EPS. We believe the strength of the Group's Thai business and steady Malaysian operations are priced in at current levels.

Source: HwangDBS Research - 26 Jun 2013