MIDF Research said it is confident that the management of AirAsia Bhd will be able to guide the budget airline out of the current turbulence faced by the global airline industry.
"The negative factors that the company faces can be mitigated with sufficient government support which we are confident that AirAsia would obtain," it wrote in a report yesterday.
"This is evident in the Tourism Ministry discussions with AirAsia, which indicate that the government views AirAsia as an important brand and an ally in promoting tourism, a core component of economic development," it added.
The local research firm has initiated coverage of the stock with a "neutral" rating and a target price of RM1.08.
MIDF Research said it expects the stock to perform in line with the market.
"AirAsia will not be having it easy this year or the next. Our projections indicate that the company walks a tight rope and there are many things that could throw it off balance: severe competition, local and foreign government regulations, spiking fuel prices, loss of tax benefits and declines in travel demand.
"These are all compounded by the large liabilities on its balance sheet," it said.
At RM0.95, AirAsia stock has fallen by 42 per cent from its peak on February 5 2008 and down 55 per cent from its historical peak achieved on May 7 2007.
"In the year to February 16 2009, the stock has gained 8 per cent, outperforming the Kuala Lumpur Composite Index by 5.3 per cent point.
"Even on that score, we are skeptical that the stock will perform better than the market for the rest of this year. The airline industry is going through a tough phase and budget airlines are no exception," said MIDF Research.
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