Despite soaring fuel prices in 2011, AirAsia posted commendable earnings that we deem impressive in the context of other airlines. Its core net income of RM843m (y-o-y: -11%) was well within our and consensus expectations, while revenue grew y-o-y by 13.3%. Catalysts for 2012 include the unlocking of value from the upcoming IPOs of its Indonesian and Thailand associates as well as contributions from its promising JVs in Japan and the Philippines. We maintain our BUY call on AirAsia with our earnings forecast and our FV of RM4.57 unchanged. AirAsia is at a 30-40% discount to its regional peers on a PE basis.
Coming in line. AirAsia reported a core net income (including Thai AirAsia and Indonesia AirAsia’s share) of RM843m (y-o-y: -11%), which was well within our and consensus expectations. Meanwhile, revenue for the year grew by 13.3% y-o-y (q-o-q: 18.2%; 4Q y-o-y: 9.3%). As we had highlighted in our results preview, core earnings in 4Q shot up by 62.3% q-o-q (vs our earlier expectations of only 46% q-o-q) but no thanks to higher jet fuel prices, it was lower by 12.3% against the preceding year.
Better off than peers. With most airlines facing a tough year in 2011 as jet fuel prices soared over 32%, AirAsia’s earnings were pretty impressive – underpinned by its abilityto maintain a flat EBITDA growth rate of 1.1% and sustain its margin well above 35%.
We attribute the impressive feat to improved load factors, better yields on ancillary revenue and a more efficient fleet management with fuel burn continuing to improve.
Briefing highlights. Key takeaways of the analyst briefing include:
• The Thailand IPO to be announced by the end of this month with Indonesia to follow some months later. The IPOs will unlock the value of AirAsia and pave the way forits net gearing to be reduced further as assets are transferred to its associates’ balance sheets.
• Management has an aggressive target of achieving 82% load factor vs our assumption of 78%. This allows room for more upside should traffic numbers remain encouraging.
• Forward booking remains encouraging showing no signs of any slowdown. But yields could be compromised as fees has been reduced of late. Nonetheless, management sees room to grow its ancillary income and fuel surcharge fee.
• The Philippines and Japan JVs on track for commencement by March and August2012 with a fleet of 4 and 2 aircrafts respectively. Management is bullish on the latter with profitability expected in its first quarter of operations. We at least concur with management’s view that Japan could post a profit in the first year despite the threat of newcomers coming into the LCC space.
• Deliveries: Malaysia: 5, Indonesia: 5, Thailand: 5. Financing secured up to 2013.
• Fuel requirements: 27% hedged for 1HFY12 at USD119/USD104 on jet fuel/Brent.
• Capacity expansion moving forward, mainly on international routes.
Maintain BUY. We
maintain our BUY call on AirAsia with
our earnings forecast unchanged. We remain positive on AirAsia as
it is poised to see more yield upside from the withdrawal of Firefly’s East
Malaysia routes. Furthermore, earnings from its ongoing JVs are expected to
contribute more this year. Note that we have yet to incorporate earnings from
its Japan and Philippine associates into our forecasts. Maintain BUY with an
unchanged fair value of RM4.57. AirAsia is trading at a discount of 30-40% to
its average LCCpeers on FY12 earnings.
In addition, this is the first time AirAsia is in a free cash flow positive
position prior to any debt drawdown.
Source: OSK188
No comments:
Post a Comment