Stock Name: AIRASIA
Company Name: AIRASIA BHD
AirAsia Bhd
(Aug 22, RM3.62)
Maintain hold at RM3.64 with target price of RM3.36: We expect AirAsia's 2QFY11 to show a marginal year-on-year (y-o-y) profit growth buoyed exclusively by its Thai associate. We expect profits at the Malaysian and Indonesian operations to drop due to a 28% rise in fuel prices and soft yield environment, consistent with the industry, further exacerbated by Firefly's jet services to East Malaysia. We maintain our 'hold' call at a target price of RM3.36 based on nine times 2011 price-earnings ratio which is 10% discount to global budget airlines' PER.
Load factor for the Malaysian operations jumped to 81.1% (+4.2 percentage points y-o-y) in 2QFY11 with 14.9% y-o-y passenger growth. The Thai and Indonesian associates also recorded strong performance with load factors of 78.3% and 76.4% on more than 20% y-o-y passenger growth. Collectively, the group produced a load factor of 79.7% (+3.5 percentage points y-o-y).
We estimate the group's 2QFY11 core net income at RM197.2 million, a growth of 5.8% y-o-y after adjusting for FRS 139 accounting standards, derivative mark-to-market (MTM) and non-cash deferred taxation assets. The drivers are improved performance at the Thai associate. We believe the Malaysian and Indonesian operations will both exhibit profit shrinkage.
Fuel prices have recently been trending downwards due to the economic challenges in Europe and the US. This is positive as we don't see any evidence of lower passenger demand for AirAsia. The budget airline will incur higher international passenger service charge (PSC) and parking and landing charges beginning Sept 15 due to new rates imposed by MAHB; we estimate this will add an additional cost of RM15 million to RM18 million per quarter or roughly 2% of average fares. This should be manageable.
We maintain our earnings forecasts and our 'hold' recommendation pending the 2QFY11 results and outlook commentary. We are positive with the developments of the MAS-AirAsia tie-up and think it will greatly contribute to sustainable and stable margins going forward. However, we have yet to be able to quantify the benefits due to sketchy details. A management visit is on the cards after the 2QFY11 results followed by a swift update. ' Maybank IB Research, Aug 22
This article appeared in The Edge Financial Daily, August 23, 2011.
Company Name: AIRASIA BHD
| Research House: MAYBANK | Price Call: HOLD | Target Price: 3.36 |
AirAsia Bhd
(Aug 22, RM3.62)
Maintain hold at RM3.64 with target price of RM3.36: We expect AirAsia's 2QFY11 to show a marginal year-on-year (y-o-y) profit growth buoyed exclusively by its Thai associate. We expect profits at the Malaysian and Indonesian operations to drop due to a 28% rise in fuel prices and soft yield environment, consistent with the industry, further exacerbated by Firefly's jet services to East Malaysia. We maintain our 'hold' call at a target price of RM3.36 based on nine times 2011 price-earnings ratio which is 10% discount to global budget airlines' PER.
Load factor for the Malaysian operations jumped to 81.1% (+4.2 percentage points y-o-y) in 2QFY11 with 14.9% y-o-y passenger growth. The Thai and Indonesian associates also recorded strong performance with load factors of 78.3% and 76.4% on more than 20% y-o-y passenger growth. Collectively, the group produced a load factor of 79.7% (+3.5 percentage points y-o-y).
We estimate the group's 2QFY11 core net income at RM197.2 million, a growth of 5.8% y-o-y after adjusting for FRS 139 accounting standards, derivative mark-to-market (MTM) and non-cash deferred taxation assets. The drivers are improved performance at the Thai associate. We believe the Malaysian and Indonesian operations will both exhibit profit shrinkage.
Fuel prices have recently been trending downwards due to the economic challenges in Europe and the US. This is positive as we don't see any evidence of lower passenger demand for AirAsia. The budget airline will incur higher international passenger service charge (PSC) and parking and landing charges beginning Sept 15 due to new rates imposed by MAHB; we estimate this will add an additional cost of RM15 million to RM18 million per quarter or roughly 2% of average fares. This should be manageable.
We maintain our earnings forecasts and our 'hold' recommendation pending the 2QFY11 results and outlook commentary. We are positive with the developments of the MAS-AirAsia tie-up and think it will greatly contribute to sustainable and stable margins going forward. However, we have yet to be able to quantify the benefits due to sketchy details. A management visit is on the cards after the 2QFY11 results followed by a swift update. ' Maybank IB Research, Aug 22
This article appeared in The Edge Financial Daily, August 23, 2011.
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