Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: ECMLIBRA
AirAsia Bhd
(Aug 19, RM1.73)
Reiterate buy at RM1.68 revised target price RM2.32 (from RM1.67): AirAsia's 2Q2010 financial results came in above our expectations due to lower than expected interest expenses. Revenue for the quarter rose 25.8% year-on-year (y-o-y) to RM940.7 million as a result of higher passenger volume as well as higher ancillary income, indicating a recovery in demand for air travel. This led to an increase in adjusted net profit (excluding deferred taxes and MTM derivative gain/loss) by 27% y-o-y to RM164.6 million, bringing year-to-date total to RM271.6 million. This hits 55% of our FY2010 estimates of RM492 million.
Ticket sales were up 20% on a y-o-y basis to RM673 million due to higher traffic and additional capacity from the two new aircraft delivered in 2Q2010. Available seat per kilometre (ASK) improved 9% y-o-y to 5.94 billion while revenue passenger kilometres (RPK) rose 15% y-o-y to 4.32 billion. Seat load factor inched up 2.2 percentage points y-o-y to 76.9% due to enhanced flight frequencies and addition of new routes. Revenue yield crept up 10% y-o-y to 22 sen per RPK.
Cost per ASK (CASK) increased 21% y-o-y to 11.7 sen/ASK as jet fuel prices shot up by almost 60% to US$100 per barrel during the quarter. However, it remained flat quarter-on-quarter. Apart from that, other costs seem to be under control as non-fuel CASK was up by a mere 5% y-o-y to 6.3 sen/ASK.
Looking ahead, we expect demand recovery to accelerate in 2H2010, especially with the Hari Raya Aidilfitri celebration around the corner as well as the year-end festivities. Forward bookings for August have already reached 54%, while September and October have already achieved 37% and 24% respectively.
We revise FY2010/12 earnings estimates by 3.9 to 17.9%, factoring in lower interest expense and lower depreciation from further aircraft delivery deferment in 2012.
We have changed our valuation method to the PER multiple as recovery in demand has increased AirAsia's earnings visibility. Our revised 12-month target price of RM2.32 (previously RM1.67) is pegged to average LCC peers' PER of 11 times on mid CY2011 earnings. Maintain 'buy'. ' ECM Libra Investment Research, Aug 19
This article appeared in The Edge Financial Daily, August 20, 2010.
Company Name: AIRASIA BHD
Research House: ECMLIBRA
AirAsia Bhd
(Aug 19, RM1.73)
Reiterate buy at RM1.68 revised target price RM2.32 (from RM1.67): AirAsia's 2Q2010 financial results came in above our expectations due to lower than expected interest expenses. Revenue for the quarter rose 25.8% year-on-year (y-o-y) to RM940.7 million as a result of higher passenger volume as well as higher ancillary income, indicating a recovery in demand for air travel. This led to an increase in adjusted net profit (excluding deferred taxes and MTM derivative gain/loss) by 27% y-o-y to RM164.6 million, bringing year-to-date total to RM271.6 million. This hits 55% of our FY2010 estimates of RM492 million.
Ticket sales were up 20% on a y-o-y basis to RM673 million due to higher traffic and additional capacity from the two new aircraft delivered in 2Q2010. Available seat per kilometre (ASK) improved 9% y-o-y to 5.94 billion while revenue passenger kilometres (RPK) rose 15% y-o-y to 4.32 billion. Seat load factor inched up 2.2 percentage points y-o-y to 76.9% due to enhanced flight frequencies and addition of new routes. Revenue yield crept up 10% y-o-y to 22 sen per RPK.
Cost per ASK (CASK) increased 21% y-o-y to 11.7 sen/ASK as jet fuel prices shot up by almost 60% to US$100 per barrel during the quarter. However, it remained flat quarter-on-quarter. Apart from that, other costs seem to be under control as non-fuel CASK was up by a mere 5% y-o-y to 6.3 sen/ASK.
Looking ahead, we expect demand recovery to accelerate in 2H2010, especially with the Hari Raya Aidilfitri celebration around the corner as well as the year-end festivities. Forward bookings for August have already reached 54%, while September and October have already achieved 37% and 24% respectively.
We revise FY2010/12 earnings estimates by 3.9 to 17.9%, factoring in lower interest expense and lower depreciation from further aircraft delivery deferment in 2012.
We have changed our valuation method to the PER multiple as recovery in demand has increased AirAsia's earnings visibility. Our revised 12-month target price of RM2.32 (previously RM1.67) is pegged to average LCC peers' PER of 11 times on mid CY2011 earnings. Maintain 'buy'. ' ECM Libra Investment Research, Aug 19
This article appeared in The Edge Financial Daily, August 20, 2010.
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