Affin maintains "Buy" rating on AirAsia, lower TP

From The Star Online: Business
6th Sep 2013

KUALA LUMPUR: Affin Research has maintained its “Buy” call on AirAsia with a lowered target price of RM3.60 given its earnings downgrade.

“We continue to like AirAsia’s sound fundamentals, which is backed by its strong operating statistics, as well as the group’s regional growth strategy,” it said in a note on Friday.

Affin said on average, fuel accounts for about 40- 50% of AirAsia’s operating cost.

“We gather that AirAsia has hedged 30% of its financial year 2013 fuel requirement at US$123 per barrel, leaving the remaining 70% at spot price,” it said.

AirAsia - Sturdy 4Q Earnings Seen

By OSK Research
12th Feb 2013


Buy
Target MYR3.39
Previous MYR3.39
Price MYR2.66



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.

Robust 4Q results likely. We expect overall yields in 4Q, typically the strongest quarter, to jump 5%-6% y-o-y to 21.4-21.6 sen/RPK, propelled by seasonally higher airfares and take-up of ancillary services. We expect AirAsia to post revenue of RM1.48bn for 4Q (up by 16% y-o-y and 20% q-o-q), boosting its FY12 revenue to RM5.07bn (+12.7% y-o-y). With jet fuel price being relatively flat q-o-q and only up by 1.7% y-o-y in 4Q, the company’s 4Q core earnings, including those from non-equity accounted associates, may
touch RM334m (q-o-q: >100%, y-o-y: +7% y-o-y). For the full year, AirAsia’s core earnings could potentially meet our FY12 estimate for RM797.8m. AirAsia - together with Asia Aviation, the Thailand listed holding company of Thai AirAsia - are expected to report their 4Q earnings on 27 Feb. We do not expect any major upside in cost as the losses from its Philippines and Japan associates may be mitigated by higher earnings contributions from AirAsia Expedia, TAA and IAA.


MAINTAIN BUY. Threat from Malindo overblown. We maintain our BUY call on AirAsia
and our RM3.39 FV, premised on 11x FY13 EPS. The stock is currently trading at an 8.6x
FY13 PE, representing a 27% discount to its peers’ average multiple. Taking into account
the market caps of Asia Aviation and its insurance arm, AirAsia is trading at a cheap 7.4x
PE versus its historical and peer averages of 10x and 12x respectively. Elsewhere, we
expect the group’s upcoming IPOs (AirAsia X and IAA) to crystallize its valuations. That
being said, we feel that in view of the budget carrier’s strong network and fleet as well as
low cost structure, investor concerns over potential threat from new entrant Malindo
pressuring AirAsia’s yields and market share have been exaggerated.

[Source]

Malaysia Airports Holdings - Exciting prospects in 2013

By Maybank IB Research
29th Jan 2013


Buy (unchanged)
Share price: MYR5.50
Target price: MYR6.60 (from MYR6.90)


Maintain Buy with  a  lower target price.  We look forward to a promising 2013 with robust traffic growth thanks to sustained economic growth and high capacity deployment plans by the domestic airlines. We are also excited with the opening of KLIA2 (officially 28 June) as it opens platforms for many new revenue streams. Maintain BUY, with a lower  DCF-based  target price ofMYR6.60/share (from MYR6.90) after adjusting for higher number of shares and other cost items.

A glut of new capacity in will force Asian airlines to ply some less profitable routes

From Star Online: Business
23rd Jan 2013

SINGAPORE: Low-cost South-East Asian airlines risk jeopardising their margins by buying too many planes too quickly, an influential aviation banker said.

Across the region, discount carriers have placed orders over the past two years for at least US$50bil worth of aircraft, taking new Boeing and Airbus jets to serve dozens of fresh routes and replace their fleets. They are betting the region's expanding middle class will demand more and more frequent air travel for years to come.

Many of those carriers were making the wrong decisions by trying to grow market share without anticipating pressure on profit margins, DVB Bank SE's Bertrand Grabowski, who heads the German bank's aviation and land transport finance divisions, told Reuters in an interview.

Asia-Pacific airlines expected to be best performers next year making US$2.3bil profit

From Star Online: Business
20th Dec 2012

PETALING JAYA: Asia-Pacific airlines are expected to be the best performers, contributing US$2.3bil profit next year, according to the International Air Transport Association (IATA).

This region will deliver the second highest absolute profit among the regions with earnings before interest and tax margins for Asia-Pacific airlines expected to grow significantly to 4.7%. Also, economies in this region remain the most dynamic and the deterioration in cargo markets is expected to come to an end next year.

Lion goes regional with Malindo

By Star Online: Business
17 November 2012

RUSDI Kirana is one of Indonesia's wealthiest people. Together with his brother Kusnan, the Kirana brothers own Lion Air and are listed by Forbes as the 34th richest individuals with a net worth of US$580mil.

But there was an air of simplicity surrounding Rusdi when he sat down to give his story to StarBizWeek. There was no phalanx of bodyguards, no designer clothes or an expensive timepiece on his wrist. Dressed ordinarily, all he had with him was a nondescript haversack.

“I walk without bodyguards because I feel nobody knows me,” he says.

He spoke about his start in the business world where as a salesman, he earned US$10 a month and was hungry every day. The interview eventually gravitated towards why he is a man that the airline industry in Malaysia needs to pay attention to.

AirAsia plans to be the first choice for travellers

By Star Online: Business
3 November 2012

TEN years on after taking a chance to start a low cost airline, Tan Sri Tony Fernandes is sitting in a hotel room in the Westin Hotel in Busan, South Korea just after launching the Tokyo-Busan air sector that will be operated by his 49%-owned unit AirAsia Japan.

In a quiet surrounding, in contrast to his public persona and frenetic business empire, he gives an quick secession of interviews like he has done many times before.

For a man who is setting up affiliates across Asia, jet-setting to exotic destinations where the Formula 1 races are held and also appearing virtually every weekend on television while watching his Queens Park Rangers play, he is remarkably full of energy.

It was the same energy he had when he built AirAsia from two planes to 115 aircraft today, all along never wavering on the positiveness of his ebullient character. He is a man whose confidence never seems to fade.

AIRASIA - Competition coming sooner

By AmResearch
2 November 2012


HOLD

Price: RM3.05

Fair Value: RM2.80

• It was reported in a local daily this morning that Malindo is bringing forward its launch date to mid-March 2013 from earlier indication of May 2013. This follows the group’s (PT lIon Air) decision to delay the launch of Batik Air from March to end-2013 as the group intends to focus on positioning Malindo as a regional player.

AIRASIA - Back to square one

By AmResearch
15 October 2012

HOLD

Price: RM3.06
Fair Value: RM2.80


It was reported in local dailies this morning that the deal to acquire PT Batavia Air is off. It is said that AA will continue with organic growth in Indonesia and the reason for cancelling the deal was: (1) high cost of restructuring Batavia Air; (2) Management time and resources required to turnaround Batavia.

AirAsia - Crystallizing Valuations

By OSK Research

12 October 2012

The impending IPOs of AirAsia’s sister companies AirAsia X, Tune Insurance and associate Indonesia AirAsia will be positive for the group as this will crystallize RM806m into AirAsia’s valuations. Incorporating the IPOs’ pricing and the latest market cap of its Thai associate Asia Aviation, AirAsia is trading at an attractive 8.6x PE vs the sector average of 12x. The proposed Batavia acquisition has been called off, which we don’t find surprising given that it is debt-laden. We maintain our BUY call on AirAsia, while keeping our RM3.91 FV based on 12x FY13 EPS. 

Malindo Airways expected to give AirAsia a run for its money

By Star Online: Business
15 September 2012

It was a marathon meeting lasting 24 hours in a hotel in Singapore over two weeks ago that resulted in the creation of Malindo Airways.

The meeting was between Rusdi Kirana, president director of Indonesia's largest privately owned airline Lion Air and Malaysia's National Aerospace & Defense Industries (Nadi) low key businessmanTan Sri Ahmad Johan.

Both had desires to expand their empires. One to set up an airline in Malaysia the same way AirAsia has set up airlines in several countries, and the other wanted to get the regional MRO business because they had “scalability and expertise.''

All this started three months ago, according to those in the know.

RHB Research upgrades AirAsia to Trading Buy, FV RM3.63

By Star Online: Business
12 September 2012

KUALA LUMPUR: RHB Research Institute has upgraded AirAsia to a Trading Buy from Market Perform and maintained its fair value for the low-cost carrier at RM3.63.

It said AirAsia's near-term earnings growth prospects are less exciting as growth from its domestic operation is tapering off, coming from an enlarged base.

RHB Research also said not helping either, are lingering losses from its new low-cost carrier start-up in Japan and the Expedia JV, given the long gestation periods for these new ventures.