Thursday, April 21, 2011

AirAsia Poised To Rise Higher After A Triangle Breakout

Stock to watch –AIRASIA(RM2.65-Trading Buy)

AIRASIA is one of the cheapest LCCs, trading at 7.5x FY12Eearnings (industry average 11-12x). It is most prepared in weathering escalating oil price headwinds given its strong ancillary income. Key catalysts include: (1) Listing of associates to crystallize the value of its investments and reduce the strain on balance sheet; (2) a stronger Ringgit; (3) upward trend of ancillary income and yield; and (4) Strong traffic from domestic and Asia Pacific demand. Our institutional research team
attached a target price of RM3.50.

AIRASIA broke out of its triangle descending wedge yesterday. Near term outlook has turned brighter as AIRASIA managed to close above the 30-d SMA (RM2.59) and mid Bollinger band (RM2.63). Technical landscape remains compelling. MACD is on the verge of staging a golden cross while the slow Stochastics and RSI are trending upwards.

Immediate resistance levels are RM2.73 (upper Bollinger band) and RM2.80 (38.2% FR). Further upside targets are 52-week high of RM3.04 and RM3.20 (upper boundary of upward channel formation). Support levels are situated around RM2.59 and RM2.54 (lower Bollinger band). Accumulate but put a stop at below RM2.54.

For leveraging, investors can also consider AIRASIA-CL (expires on 8 December 11), which is trading at a discount of 11.7% with a high gearing of 5.8x.

AirAsia Poised To Rise Higher After A Triangle Breakout.

Source: HLeBroking

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