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Thursday, December 29, 2011

Airasia, Axiata, Dialog (OSK)

AirAsia - Numbers to Take Flight
We are optimistic on AirAsia‘s outlook for 2012 on anticipation that earnings will climb 21% on the back of lower jet fuel prices amid resilient growth in low cost travel. As low cost air travel dominates ASEAN skies with 32% penetration, AirAsia is the best proxy to this resilient segment during times of economic uncertainty, during which there may be extensive down-trading in air travel. The low cost carrier, which stands to benefit from its two new hubs in Manila and Tokyo, will also get an earnings boost from its fruitful AirAsia Expedia JV tie-up and its ability to monetize its training academy. Maintain BUY, with a FV of RM4.57.

Axiata - Well Positioned For The Future
We maintain our BUY recommendation on Axiata based on a SOP valuation of RM5.50. While the group‘s overall prospects are clouded by macro-economic uncertainties and as its overseas OpCos expand amid a moderating global growth, we are encouraged by the strategic initiatives undertaken by management to keep operating cost lean and to promote the sharing of infrastructure on the back of
accelerating data usage. Valuation-wise, Axiata remains an inexpensive regional mobile exposure, trading at a 13.5x FY12 EPS (cheapest domestic telco). A major re-rating catalyst would come from a higher dividend payout.

Dialog - A Mix of Offensive and Defensive Qualities
Dialog is the most defensive O&G stock in the sector given its resilient business comprising a mix of recurring and one-off income. Its recurring income is contributed by its centralised tankage facility (CTF), plant maintenance and marginal oilfield divisions, while its one-off income is from the provision of EPCC,
specialist products and services and catalyst handling. For 2012, we expect Dialog to bid for a second marginal oilfield and make good progress in its development of Phase 2 of Pengerang CTF. Maintain BUY. Our Fair Value for Dialog is RM3.66, based on a sum-of-parts valuation.

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