Target RM3.50 (Long Term: Outperform)

AirAsia attended our London conference on 1-2 Nov before embarking a non-deal roadshow with us on 5-6 Nov. Feedback was generally positive and investors believed in the credible business model. However, consensus was that it would face headwinds from Malindo's entry. Investors believed that although Malindo will not be an existential threat to AirAsia, the impact on the latter's profitability will be negative. As a result, investors are waiting for the 'right price', suggesting that new buying will materialise only if the share price weakens sufficiently. We retain Outperform and our target P/E of 9x (sector average). Expansion into the underpenetrated North Asian market is a potential catalyst.