KUALA LUMPUR, May 28 — Research firms have maintained their rating on AirAsia Group Bhd (AAG), following the airline’s lower-than-expected financial results.

The group’s net loss for the first quarter ended March 31, 2021 (Q1 FY2021) narrowed to RM767.42 million from RM803.85 million in the same quarter last year.

MIDF Research reiterated its "sell” call on AAG’s shares but revised the target price (TP) higher to 44 sen from 21 sen previously.

"We opine that although recovery for the aviation sector and air travel is expected to gradually take place in 2021, it remains an uphill battle for AAG, given that it is struggling financially to remain afloat in the current pandemic-laden operating environment,” the research house said in a note today.

Another research firm, CGS-CIMB Securities Sdn Bhd has reiterated its "reduce" recommendation on AAG as it now projects an even lower traffic volume in 2021 than 2020, but noted that a much lower operating costs might help to narrow core losses year-on-year.

However, it had increased the TP to 19 sen per share in view of a potential 30 per cent cut to AAG’s operating lease liabilities.

It noted that the airline could face a potential de-rating on the back of a slower-than-expected recovery in domestic travel demand due to the reimposition of interstate travel restrictions, the longer-than-expected closure of international borders due to the surge in new Covid-19 cases, and the slow pace of vaccination in Asia. — Bernama