Stock Name: AIRASIA
Company Name: AIRASIA BHD
Research House: MIDF
AirAsia Bhd
(May 10, RM3.04)
Maintain buy at RM3.10 with target price raised to RM3.67 (from'' RM2.80): We visited the Indonesia AirAsia (IAA) and Thailand'' AirAsia (TAA) management recently to learn of AirAsia's (AA) other subsidiaries and gauge their impact on AA. We were'' impressed at how well it is performing and pleasantly surprised at how AA's subsidiaries were fitting into the overall growth strategy for AA.
IAA is No 2 in carrying international passengers in Indonesia, which did not surprise us given IAA's strategy to leverage on the high traffic coming from Singapore and Malaysia, representing 33% and 29% contribution to total 2010 international markets respectively, by connecting five of its hubs. Australia and Hong Kong represent 9% and 6% respectively.
IAA turned profitable in FY10 as it registered 474.4 billion rupiah (RM166 million) net profit from a net loss of 189.3 billion rupiah in FY09. This came on the back of FY10 revenue growth of 37.1% year-on-year (y-o-y) to 2,764 billion rupiah, while total cost increased only by 8.8% y-o-y to 1,951 billion rupiah despite operating in a high fuel cost environment. ''
TAA began operations in 2004 with the first domestic flights, Bangkok to Chiang Mai and Hat Yai, and first international'' flight, Bangkok to Singapore. We were pleasantly surprised to find that TAA has a very strong presence in the Thailand aviation market in a comfortable No 2 spot. It had a 19.9% market share or 5.7 million total passengers in FY10. ''
TAA also saw a turnaround in its net profit in FY10, from a net loss of 808.9 million baht (RM80 million) to a net profit of 2.85 billion baht. Its revenue grew by 32.8% y-o-y to 12.4 billion baht, as it cemented its No 2 position in Thailand.
The most advantageous part of the relationship between AA, TAA and IAA is the sharing of air traffic rights. We believe this is advantageous for AA as IAA and TAA can be 'feeders' to destinations offered by AA as it can connect with travellers from such places as India and Australia without having'' to fly to those destinations.
Possible year-end listings of TAA and IAA will be positive for AirAsia as it should crystallise the value of its investment in its controlled entity and associate. We also like the fact that with the listing of both entities, AirAsia will not'' be burdened by any future capital expenditure requirements by TAA and IAA.'' ''
Maintain 'buy' with a revised target price of RM3.67 (from RM2.80). We remain upbeat on AirAsia's potential despite the'' current uncertain economic climate which is affected by the high oil prices. It has a natural hedge as it matches forward bookings with fuel requirements and it had recently introduced a fuel price surcharge. Hence, we are not revising our FY11 net earnings. However, we are assigning a higher price-earnings ratio of'' nine times, the mean PER of its regional peers, to AA's FY11 earnings per share. ' MIDF Research, May 10
This article appeared in The Edge Financial Daily, May 11, 2011.
Company Name: AIRASIA BHD
Research House: MIDF
AirAsia Bhd
(May 10, RM3.04)
Maintain buy at RM3.10 with target price raised to RM3.67 (from'' RM2.80): We visited the Indonesia AirAsia (IAA) and Thailand'' AirAsia (TAA) management recently to learn of AirAsia's (AA) other subsidiaries and gauge their impact on AA. We were'' impressed at how well it is performing and pleasantly surprised at how AA's subsidiaries were fitting into the overall growth strategy for AA.
IAA is No 2 in carrying international passengers in Indonesia, which did not surprise us given IAA's strategy to leverage on the high traffic coming from Singapore and Malaysia, representing 33% and 29% contribution to total 2010 international markets respectively, by connecting five of its hubs. Australia and Hong Kong represent 9% and 6% respectively.
IAA turned profitable in FY10 as it registered 474.4 billion rupiah (RM166 million) net profit from a net loss of 189.3 billion rupiah in FY09. This came on the back of FY10 revenue growth of 37.1% year-on-year (y-o-y) to 2,764 billion rupiah, while total cost increased only by 8.8% y-o-y to 1,951 billion rupiah despite operating in a high fuel cost environment. ''
TAA began operations in 2004 with the first domestic flights, Bangkok to Chiang Mai and Hat Yai, and first international'' flight, Bangkok to Singapore. We were pleasantly surprised to find that TAA has a very strong presence in the Thailand aviation market in a comfortable No 2 spot. It had a 19.9% market share or 5.7 million total passengers in FY10. ''
TAA also saw a turnaround in its net profit in FY10, from a net loss of 808.9 million baht (RM80 million) to a net profit of 2.85 billion baht. Its revenue grew by 32.8% y-o-y to 12.4 billion baht, as it cemented its No 2 position in Thailand.
The most advantageous part of the relationship between AA, TAA and IAA is the sharing of air traffic rights. We believe this is advantageous for AA as IAA and TAA can be 'feeders' to destinations offered by AA as it can connect with travellers from such places as India and Australia without having'' to fly to those destinations.
Possible year-end listings of TAA and IAA will be positive for AirAsia as it should crystallise the value of its investment in its controlled entity and associate. We also like the fact that with the listing of both entities, AirAsia will not'' be burdened by any future capital expenditure requirements by TAA and IAA.'' ''
Maintain 'buy' with a revised target price of RM3.67 (from RM2.80). We remain upbeat on AirAsia's potential despite the'' current uncertain economic climate which is affected by the high oil prices. It has a natural hedge as it matches forward bookings with fuel requirements and it had recently introduced a fuel price surcharge. Hence, we are not revising our FY11 net earnings. However, we are assigning a higher price-earnings ratio of'' nine times, the mean PER of its regional peers, to AA's FY11 earnings per share. ' MIDF Research, May 10
This article appeared in The Edge Financial Daily, May 11, 2011.
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