AirAsia Group released its 4Q operating stats yesterday. MAA (Malaysia AirAsia), TAA (Thai AirAsia) and IAA (Indonesia AirAsia) saw their RPKs growing by 7.8% / 22.5% / 10.9% y-o-y respectively during the quarter. Overall, the numbers for all three country hubs came well within our estimates. Growth in passenger numbers continue to be promising for the Group, with TAA and IAA showing the strongest prospects – TAA will benefit from being closer to the city by operating in Don Muang Airport while the passenger growth of IAA will be driven by the recent opening of its new hub in Ujung Pandang coupled with the aggressive expansion of its ticketing distribution network. We have a BUY call on AirAsia, with an unchanged FV of RM3.39 premised at 11x PE. We retain our BUY call on AAV (Asia Aviation), with a higher FV of THB7.35, which is pegged at 14.5 adjusted EV/EBITDAR.
Encouraging set of numbers. The AirAsia Group released its 4Q operating stats yesterday. MAA, TAA and IAA saw their RPKs growing by 7.8% / 22.5% / 10.9% y-o-y respectively during the quarter. Combined, the Group saw its RPK grow by 9.3% y-o-y in 4Q. The encouraging numbers are due to the seasonally stronger demand for air travel typically witnessed at year-end. For the full-year, MAA / TAA / IAA saw their RPKs grow by 8.1% / 16.6% / 5.2% respectively, with load factors of 79.5% / 82.3% / 77.1%. Overall, the numbers for all its three country hubs came well within our estimates.
New routes nudges load factor higher for Malaysia. With five new routes introduced in 4Q amid the high seasonal demand, the load factor for MAA during the period touched 82.1%, its highest quarterly load factor since the 82.3% recorded in 4Q-2011. The new routes introduced are all international routes – three to China (Kunming, Guangzhou and Nanning) and two to Indonesia (Solo and Lombok). We understand from management that December 2012’s load factor is its all-time high. We note that the q-o-q momentum for air travel in the final quarter of the year has remained resilient.
TAA gets boost from Don Muang. Of the three country hubs, TAA posted the strongest growth rate of 22.5% y-o-y for the quarter despite only adding two aircraft with only three new routes introduced, connecting Bangkok to Mandalay (Burma), Wuhan and Xian (China). Note that the surge in RPK in 4Q2012 was not because of a low base y-o-y due to the Thai flood. Management highlighted that the strong growth from TAA was largely attributed to the higher passenger load, up 3.5ppts y-o-y to 81.8% in the quarter under review, marking it the highest load factor achieved for in the final quarter of the year compared to the past few years. The improved load factor was likely driven by domestic passengers who may have opted to fly on AirAsia as opposed to other carries. This is because TAA now operates in Don Muang Airport, which is favoured by passengers as it is closer to the city and more accessible compared to the Suvarnabhumi Airport.
Indonesia looking better. With the addition of seven new routes, the highest number of new routes introduced, IAA’s RPK staged an impressive growth of 10.9% y-o-y in 4Q-2012. Although RPK growth is on the lower double-digit range, TAA’s passenger growth improved significantly by 28.6% y-o-y in 4Q2012 (FY12: +16.7% y-o-y). The higher passenger growth seen can be attributed to IAA’s aggressive efforts in growing its agency and ticketing distribution workforce given the country’s low internet penetration. Additionally, the opening of a new hub at Ujung Pandang has also buoyed passenger growth, which also bodes well in improving ancillary earnings.
AirAsia
Maintain BUY. We maintain our BUY call on AirAsia, with an unchanged FV of RM3.39, premised on 11x PE. This is still below the global sector low cost carrier peers’ average of 12x. We like AirAsia’s resilient low cost carrier business that taps into the growing middle income segment, as well as its expanding earnings potential of its associates. Reflecting its stake in listed Asia Aviation’s market cap, AirAsia is trading at a cheap 8x PE versus its peers’ historical average of 10x and 12x. Furthermore, the group’s upcoming IPOs will further crystalize its valuations.
Asia Aviation
Maintain BUY with higher FV. We continue to like this low cost carrier despite its perceived rich valuation. We reiterate that AAV could command a higher valuation given its strong dominance in the low cost carrier space coupled with its aggressive fleet expansion strategy, which would only lead to further improvements in its earnings. We now ascribe a higher adjusted EV/EBITDAR multiple of 14.5x, which is in line with the 15x adjusted EV/EBITDAR multiple that AirAsia commanded during its early years of listing. With our earnings forecast unchanged, and as we peg the stock to a higher valuation multiple, we raise our FV on AAV to THB7.35.
Source: OSK
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