KUALA LUMPUR: ECM Libra Research is maintaining AIRASIA BHD [ ]’s target price at RM3.56 based on mid-CY12 valuation of 10.0 times price-to-earnings.

It said on Friday, July 22 that as AirAsia has already achieved its target price, it downgraded it from buy to HOLD.

“While we expect the impending listing of its associates and affiliate to be positive newsflow in the near term, persistent high fuel cost remains a concern although there is sign of moderation,” it said.

On Thursday, AirAsia  formalised a 49:51 joint venture with All Nippon Airways to establish a low cost airline in Japan which is expected to commence operations in August 2012.

“While we are positive on this news, it is premature to impute any earnings upgrade at this juncture,” it said.

ECM Libra Research said it was positive of this news as it will further strengthen AirAsia’s foothold as Asia largest low cost carrier. Through its AirAsia X affiliate, AirAsia currently operates long haul flights to Haneda Airport, Tokyo.

“We view Japan as a lucrative market for AirAsia given its large population of 127 million while the greater region of North East Asia has a population of 500 million. In 2010, there were 14.7 million Japanese travelling abroad with 5.1 million visitors from the Northeast Asia,” it said.

ECM Libra Research said although Japan is a matured aviation market, the proliferation of low cost carriers is still at infancy stage.

It added the presence of ANA, Japan’s largest airline, as a JV partner will allows AirAsia Japan to capitalise on the former’s clout in Japan aviation industry. ANA will play contributing role as a partner in setting the foundation of schedule flights such as transfer of slots and pursue new traffic rights.

“While management guided that AirAsia Japan is expected to be profitable from its first year of operation, we maintain our estimate at this juncture until there is better clarity on aircraft procurement, AOC approval, and flight commencement,” it said.