DBS Vickers downgrades Asiatravel.com (5AM.SG) to Hold from Buy, cuts target $0.40 from $0.63 after group “plunged” into red in 4Q. 

Notes, higher operating expenses incurred to start up new products contributed to the poor performance, while low utilization of shuttle bus fleet, increased promotional activities added to the cost burden.

 

“While the Group has been proactive in rolling out new product offerings in the last FY, it has not attracted sufficient critical mass to justify these investments yet.” 

 

Tips FY11 will also be weak year, with ad, promotion costs likely to remain high. Cuts FY11/12 earnings estimates by 35%/21%; adjusted earnings expected to grow only 9% CAGR over FY09-12. 

 

"We remain skeptical of the Group’s strategy of multiple new product lines and will need more assurance of proper execution by way of earnings recovery before we re-rate the stock." 

 

Shares off 2.4% at $0.405.