Kenanga Research Upgrades Ratings For Aviation To Overweight From Neutral

KUALA LUMPUR, July 12 (Bernama) -- Kenanga Research has upgraded its ratings for the aviation sector from neutral to overweight, supported by AirAsia Bhd's low fuel cost, better yields and load factor on stronger travel demand coupled with lower earnings risks from associates. In a note Tuesday, it said the recent dip in Malaysia Airports Holdings Bhd's (MAHB) share price also contributed to its decision to revise upward its ratings for the sector. The research house said AirAsia's share price has increased 38 per cent on the back of the first quarter 2016 results, while MAHB's share price dipped four per cent, likely dragged by the recent bombing in Turkey. "Nonetheless, MAHB airports' passenger growth is deemed in line with our target which we have decided to keep unchanged at three per cent and 20 per cent for Malaysian and Turkey operations, respectively. "We still expect AirAsia to fare better against MAHB, benefitting from the low fuel cost and improvements in load factor and yields," Kenanga Research said. The research house has chosen AirAsia to be among its top 10 picks for the first time this coming quarter. It said AirAsia is ready to chart another strong quarter ahead, supported by the low cost, improvement in yields, improved load factor underpinned by strong travel demands and better contribution from its associates, arising from load factor and yields, driven by strong travel growth from associates. In light of the drop in its share price coupled with intact fundamentals, Kenanga Research upgraded its call for MAHB to outperform with an unchanged target price (TP) of RM7.11 while keeping Airasia's TP of RM3.41. (US$1 = RM3.99) At 11.40 am, AirAsia's share rose one sen to RM2.64 with 11.88 million shares transacted, while MAHB's share climbed four sen to RM6.10 with 429,400 shares changing hands. -- BERNAMA