AirAsia to enter Japan? (CIMB)

If last Friday’s news report of a Japanese LCC JV between AirAsia and ANA is true, it is positive as Japan has huge potential for growth given its very low LCC penetration rate. AirAsia Japan could launch domestic flights as well as international short-haul regional flights from its base in Japan. A Japan base could also be AirAsia X’s beachhead for an assault on transpacific destinations. We maintain our OUTPERFORM call and target price of RM4.20, based on 9x CY12 P/E, as AirAsia solidifies its lead as Asia’s premier LCC, with Thailand and Indonesia already profitable, and with new ventures in the Philippines and Vietnam on the cards. Potential share price re-rating catalysts include successful listings of its Thai and Indonesian associates, and positive newsflow on its Japan venture.