Key indicators showed that there is continuing growth in AST’s online hotel and air ticket reservations for 1Q09. Total online monthly room nights rose 3% y-o-y on average, while online air ticket sales continued its fast track, up 44% q-o-q.

The online air ticket sales were on track, but online monthly room rates were weaker than we expected due to the closure of the Bangkok Airport in Nov 08. Amid the recessionary environment and slow online monthly room nights in 1Q09, we are reducing monthly room nights assumption from 15% to 8%, and lowered our earnings estimates by 4.2% for FY09.

According to PhoCusWright’s US Online Travel Overview Eighth Edition in Nov 08, the annual growth in online travel in the US will continue to outpace the total travel market through 2010. Online leisure/unmanaged business travel, which accounts for close to 35% of the total travel business in US, is expected to grow 9% in 2008 and 7% annually through 2010. The online travel segment in Asia which accounts a mere 10% of the total travel business looks to have a greater growth potential.

AST has been actively buying back its shares since May 08 collected some 7.6% of its issued shares at average cost of 29c. Moreover, AST’s recent white label channel agreement with Yahoo! SouthEast Asia Pte to make available its full range of travel products on an independently branded site reflects good recognition for its travel services and opens doors to future collaborations with renowned international players.

AST’s current market capitalisation only reflects the value of its fully integrated instant confirmation booking engine that is estimated to worth up to S$60m, notwithstanding its steady earnings stream. Moreover, its good financial shape ($7m in cash with zero bank borrowings), coupled with a near 30% discounted valuation to the sector average of 17x current PER, make AST an attractive acquisition target. Reiterate Buy.