AirAsia - Losses Outweigh Privatisation Possibility (OSK)

Excluding losses from Forex, unwinding of fuel hedges and losses associated with Lehman, AirAsia’s core loss before tax of RM22.5m YTD is still significantly below expectations. While we see the airline recover to profitability in the 4Q, the longer term prospects with net gearing above 3x, continued losses at associates and tough competition lead us to slash our forecasts. We feel that the negative prospects outweigh the possibility of a privatisation and drop our fair value from RM1.10 to RM0.67. Sell.