AIA yesterday dampened consensus market expectations for full-year 2010 retail revenue, pulling back from an expected revenue of $104 million to one between $90 million to $93 million.
The downgrade was due to a combination of declining passenger numbers and reduced spending, construction work in the departures area and the change from two duty-free operators to one.
AIA shares, which closed at $1.67 on Wednesday, opened yesterday at $1.57 but slightly retraced some losses to trade around $1.61.
AIA's chief financial officer, Jason Dale, said there was no change to previous earnings guidance provided for full-year 2009 - which was expected to be at the lower end of an after-tax profit range of $100 million to $110 million.
ABN Amro Craigs broker Peter McIntyre said AIA was emphasising the bulk of the downgrade was "one-off" in nature, being largely attributable to lower "minimum annual guaranteed" rent from two duty-free operators and operating in a different economic environment"It's a bit disappointing coming six weeks after the 30 March briefing, when commentary was generally positive about the increased transtasman capacity and the propensity of those travellers to spend disproportionately more on duty-free," Mr McIntyre said.
He said while ABN had already "substantially" downgraded earnings expectations for AIA in both 2009 and 2010, its new management had clearly "not quite got their heads around" the implications of the retail spend, guaranteed rental and the duty-free issues.
Forsyth Barr broker Tony Conroy said the issues AIA was facing made the short term "challenging" but in the long term, issues such as the construction work would be a positive.
"In some ways this [downgrade] was expected, as the fall-off in the number of international passengers and their reduction in spending was always going to have an impact on AIA's retail revenue," Mr Conroy said.
While the retail figures were down more than expected - reflected yesterday in the market reaction, with the share price down 7c - it reconfirmed for investors that AIA "is a sound long-term investment".
Mr McIntyre also noted its management had historically been good, AIA had large land banks and was "essentially" a monopoly player, being New Zealand's gateway.
ABN has a buy recommendation on the stock and 12-month target price of $2.20 but is likely to review the buy recommendation, while Forsyth Barr has a hold recommendation, $2 valuation and 12-month range of $1.56 to $2.30.
The brokers' financial disclosure documents are available on request.
