AirAsia - Sturdy 4Q Earnings Seen

We expect AirAsia’s 4Q earnings to soar on the back of strong RPK growth and load factor amid seasonally higher yields and flat jet fuel price. We maintain our BUY call on  the  stock,  with  our  FV  unchanged  at  RM3.39,  premised  on  11x  FY13  earnings. Incorporating  the  market  caps  of  Asia  Aviation  and  the group’s insurance  arm, AirAsia is trading at a cheap 7.4x PE vs its historical and peers average of 10x and 12x respectively. 

Encouraging  numbers  so  far.  In  4QFY12,  Malaysia  AirAsia  (MAA),  Thai  AirAsia  (TAA) and  Indonesia  AirAsia  (IAA)  reported  that  revenue  passenger  kilometres  (RPK)  grew  by 7.8%/22.5%/10.9%  respectively  y-o-y.  The  encouraging  numbers  were  due  to  seasonally stronger  year-end  air  travel  demand.  Meanwhile,  the  full-year  RPKs  of  MAA/TAA/IAA jumped 8.1%/16.6%/5.2% respectively, with load factors coming in at 79.5%/82.3%/77.1%. Overall,  the  numbers  from all three of the group’s country  hubs  came  in  well  within  our estimates. Following the introduction of five new routes in 4Q amid high seasonal demand, MAA’s load  factor  during  that  period  hit  82.1%,  its  highest  quarterly  number  since  the 82.3%  recorded  in  4Q2011.  The  new  routes  are  all  international  destinations  –  three  to China (Kunming, Guangzhou and Nanning) and two to Indonesia (Solo and Lombok). We
gather  from  management  that  the  December  2012  load  factor  was  also  an  all-time  high. We note that the q-o-q air travel momentum in 2012’s final quarter had remained resilient.

Source: OSK