Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: OSK
AirAsia Bhd
(Jan 25, RM2.66)
Maintain buy at RM2.82 with target price RM3.78: AirAsia posted sterling operating stats for Q4, making it the strongest quarter ever for the low-cost carrier (LCC). During the quarter, revenue per kilometre shot up 20.6%, 9.7% and 17.6% year-on-year (y-o-y) for Malaysia, Thailand and Indonesia respectively, accompanied by strong load factors of 82%, 80% and 78%. The number of passengers carried for Malaysia and Thailand surged 11.1% and 13.2% y-o-y respectively while that for Indonesia was 6.5% y-o-y, which we think was due to the flight disruptions caused by volcanic ash spewed from Merapi's eruption.
On a full-year basis, passengers carried on the Malaysian side came close to our forecasts, falling short by only 2% of our full-year estimate although we note that we have been a little too optimistic on AirAsia's associates given that their passengers carried missed our full-year estimate by 5%.
AirAsia is studying the possibility of a dual listing in more developed markets such as the United States or Hong Kong given the demand for its shares from foreign investors. This is also to enhance its ability to fetch a relatively higher valuation as AirAsia is possibly the world's cheapest airline in the LCC category. We are neutral on this development as typically a dual listing does not give rise to additional benefit in the longer term but incurs higher listing cost.
The airline's last reported foreign shareholding stood at 51.55% although this is likely to level off after the departure of some foreign funds yesterday, which led to the share price dropping by as much as 8% in the morning.
We believe this exodus was triggered by the shift in asset allocation by portfolio managers since from a fundamental valuation stand-point, AirAsia is still a compelling stock to own. We advise investors to take the opportunity to accumulate this company's shares after yesterday's sell-off.
Although AirAsia's passenger numbers missed our forecast slightly (2% on AirAsia Malaysia and 5% on its 2 associates), we still retain our earnings estimates at this juncture as we believe that the strong passenger yields garnered in the peak Q4 season will push its earnings closer to our full-year forecast.
Maintain 'buy' on AirAsia, with our target price unchanged at RM3.78, premised on the global LCC peer average 12 times PE. ' OSK Investment Research Sdn Bhd, Jan 25
This article appeared in The Edge Financial Daily, January 26, 2011.
Company Name: AIRASIA BHD
Research House: OSK
AirAsia Bhd
(Jan 25, RM2.66)
Maintain buy at RM2.82 with target price RM3.78: AirAsia posted sterling operating stats for Q4, making it the strongest quarter ever for the low-cost carrier (LCC). During the quarter, revenue per kilometre shot up 20.6%, 9.7% and 17.6% year-on-year (y-o-y) for Malaysia, Thailand and Indonesia respectively, accompanied by strong load factors of 82%, 80% and 78%. The number of passengers carried for Malaysia and Thailand surged 11.1% and 13.2% y-o-y respectively while that for Indonesia was 6.5% y-o-y, which we think was due to the flight disruptions caused by volcanic ash spewed from Merapi's eruption.
On a full-year basis, passengers carried on the Malaysian side came close to our forecasts, falling short by only 2% of our full-year estimate although we note that we have been a little too optimistic on AirAsia's associates given that their passengers carried missed our full-year estimate by 5%.
AirAsia is studying the possibility of a dual listing in more developed markets such as the United States or Hong Kong given the demand for its shares from foreign investors. This is also to enhance its ability to fetch a relatively higher valuation as AirAsia is possibly the world's cheapest airline in the LCC category. We are neutral on this development as typically a dual listing does not give rise to additional benefit in the longer term but incurs higher listing cost.
The airline's last reported foreign shareholding stood at 51.55% although this is likely to level off after the departure of some foreign funds yesterday, which led to the share price dropping by as much as 8% in the morning.
We believe this exodus was triggered by the shift in asset allocation by portfolio managers since from a fundamental valuation stand-point, AirAsia is still a compelling stock to own. We advise investors to take the opportunity to accumulate this company's shares after yesterday's sell-off.
Although AirAsia's passenger numbers missed our forecast slightly (2% on AirAsia Malaysia and 5% on its 2 associates), we still retain our earnings estimates at this juncture as we believe that the strong passenger yields garnered in the peak Q4 season will push its earnings closer to our full-year forecast.
Maintain 'buy' on AirAsia, with our target price unchanged at RM3.78, premised on the global LCC peer average 12 times PE. ' OSK Investment Research Sdn Bhd, Jan 25
This article appeared in The Edge Financial Daily, January 26, 2011.
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