The extension of the tax allowance for budget carrier AirAsia Bhd is indeed good news as 60 per cent of its qualifying capital expenditure incurred from July 1 2009 to June 2014 will enjoy permanent tax savings.
OSK Research, in a note Wednesday, said as the investment allowance was only granted for aircraft based in Malaysia, this may lead to the company parking more aircraft under its books.
The approval is subject to the condition that the capex will exclude any aircraft not based in Malaysia and should any aircraft be sold or leased within five years.
In such a case, there will be a clawback of the investment allowance used on the aircraft and this may discourage the airline from selling and leasing back new aircraft to fully capitalise on the tax incentive.
"Together with this piece of good news, we are also excited with the potential announcement of some corporate exercise pertaining to its plan for AirAsia X and Indonesia AirAsia," it said.
Thus, OSK said it was maintaining its "BUY" recommendation, with an unchanged fair value of RM1.48 on AirAsia, supported with the corporate exercise in the pipeline and as the share price offered some upside after the recent weakness.
Source : Bernama
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