Deutsche Bank Research has downgraded low-cost carrier AirAsia Bhd to “sell” from “hold” in view of higher jet fuel prices, weaker ringgit and impact on passenger yields due to capacity growth from competitors. DB Research has a target price of RM1.75 for AirAsia Berhad. In view of falling ringgit and rising crude, what is the forecast statistical indicative price range for AirAsia?
The trend for this Company does not appear too “optimistic” as both 20D MA and 50D MA are both sloping down as well as the 20D MA is closing below the 200D MA. In fact, the share price of AirAsia has fallen below the 200D MA. Based on the Fibonacci projection, we may possibly expect some support points at RM2.04, RM1.74 and RM1.32.
If we look at the inter-relationships between the share price of AirAsia / USDMYR exchange rate / Brent (USD), the relationship is rather mixed. When the crude fell by end 2014, the share price of AirAsia did not go up but fell (which may be possibly due to a prevailing rumor read more).
As expected (consistent with mixed relationships), the predictive power r of the multiple regression (shown below) is only 0.286.
Nevertheless, the current price of RM2.20 is fairly close to the predicted share price of RM2.34 with a 95%-confidence interval of RM1.27 and RM3.41.
In a nutshell, at current brent / exchange rates, there could be potential trading opportunity if AirAsia’s share price hovers around RM1.27 – RM1.32.
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