Tuesday, April 03, 2012

Airasia broke the important RM3.50 mark

Background

When I posted on Airasia's results for QE30/9/2011 in November last year, I recommended that one should reduce or sell into strength if one has Airasia shares (here). Since then, the stock has been drifting. Last week, Airasia broke below the important RM3.50 support. This is the medium-term uptrend line support (see Chart 1) as well as being the 200-day SMA line support. A quick recovery above the RM3.50 level is critical but six days later, there is still no recovery insight. Can Airasia stage a belated recovery like what it did in September 2011? We will have to wait & see. However, with each passing day, the prospect of a recovery dimmed. The stock may continue to slide to the next support at RM3.00.


Chart 1: Airasia's daily chart as at April 3, 2012_11.00am (Source: Quickcharts)


Chart 2: Airasia's daily chart as at April 2, 2012_plotted on log scale (Source: Tradesignum)

Latest Financial Results

For QE31/12/2011, Airasia's pre-tax profit increased by 211% q-o-q but declined 13% y-o-y to RM338 million while turnover increased by 18% q-o-q or 7% y-o-y to RM1.272 billion. Net profit dropped by 11% q-o-p or 57% y-o-y to RM136 million. This is due to increase in income tax due mainly to higher deferred tax which is in turn due to increased in Deferred Tax Liabilities of RM15.5 million & reduction in Deferred Tax Assets of RM182.6 million.



Table: Airasia's last 8 quarterly results


Chart 3: Airasia's last 23 quarterly results

Other Comments

There are a few reports which are bullish on Airasia due to two main reasons: the unlocking on the value of its investment in Airasia Thailand & Airasia Indonesia which are due to be listed soon and increased consumer spending in South East Asia. I would agree with these two points. However, the stock is affected by two negatives, one of which- the fear that Airasia would suffer from the cross shareholding arrangement exercise involving Tune & Khazanah, the parent of MAS- has probably been priced in. The other is my personal fear that Tony Fernandes's increasing involvement in sporting activities such as his acquisition of a EPL team, QPR and also his participation in a Formula One racing team, Lotus. This level of sporting activities is a serious drain of Tony's precious time & energy which could affect the quality of his decision making in Airasia.

Conclusion

Based on the negative technical outlook, I would maintain my early rating which is to reduce one's position in this stock.

2 comments:

Kong Hui CHONG said...

Who was selling?

EPF trade record for AirAsia

Disposed 29/03/2012 4,000,000
Acquired 29/03/2012 1,086,100
Disposed 28/03/2012 2,341,100
Disposed 27/03/2012 3,000,000
Acquired 27/03/2012 2,638,300
Disposed 26/03/2012 792,700
Acquired 23/03/2012 393,900
Disposed 23/03/2012 595,300
Disposed 22/03/2012 3,582,900
Disposed 22/03/2012 820,400
Disposed 21/03/2012 3,853,600
Disposed 20/03/2012 2,371,400
Disposed 19/03/2012 2,000,000

Net buyer
WELLINGTON MANAGEMENT COMPANY, LLP

Acquired 20/03/2012 235,400
Disposed 20/03/2012 358,865
Disposed 21/03/2012 35,030
Acquired 22/03/2012 4,117,345
Disposed 22/03/2012 4,900
Acquired 23/03/2012 7,400

Alex Lu said...

Hi Kong Hui CHONG,

Thanks for the info. These two shareholders are actively trading the stock. I can't draw any conclusion from this information.