Shares of AirAsia X Bhd. experienced a significant boost after a positive analyst report suggested that the financially distressed classification of the company could be lifted. The Malaysian medium-haul airline saw a surge of up to 30% in its share price, ultimately closing 29% higher at 2.33 ringgit ($0.51), marking its largest one-day gain in a year.
Maybank Investment Bank played a major role in this surge by re-initiating coverage on AirAsia X with a buy rating and setting a target price at MYR3.58, indicating a substantial upside from the current price. In a note, Maybank analyst Yin Shao Yang noted that the company has produced three consecutive quarters of profits, making it eligible to have its financially distressed classification lifted by Bursa Securities.
Several equities analysts attribute Thursday’s stock gains to the Maybank note. Additionally, Yin from Maybank stated that AirAsia X may become more profitable post-Covid-19 due to higher flight fares resulting from reduced competition, as well as a significant drop of about 70% in aircraft lease rates.
Furthermore, FSMOne analyst Alwyn Chew highlighted AirAsia X’s strong operating performance in the second quarter as another contributing factor to the surge in share price. The airline reported that its second-quarter seat capacity was over 26 times higher than the same period last year, with 818,422 seats flown. The passenger load factor also increased by 47 percentage points to 76% compared to a year earlier.
AirAsia X has expressed its intention to remove its financially distressed status by submitting an application to Bursa Securities on July 20, citing recent improvements in its financial performance. While awaiting the regulator’s decision, the company has also applied for an additional three-month extension to submit a restructuring plan in case it does not receive approval to exit its financially distressed status.
AirAsia X initially received the financially distressed classification from Bursa Securities in October 2021 due to accumulating losses during the Covid-19 pandemic.