AirAsia Bhd (Nov 2, RM3.85)
Maintain neutral with target price RM3.45: AirAsia is scheduled to release its 3QFY11 results on Tuesday. Based on its July to September operating statistics, we expect 3QFY11 figures to come in flat on a quarter-on-quarter (q-o-q) basis but higher year-on-year (y-o-y).
In 3QFY11, AirAsia carried 4.3 million passengers, 3% lower q-o-q but 7.6% up y-o-y. Load factor in 3QFY11 fell marginally by 3.7 percentage points to 77.9% as available seat kilometres (ASK) expanded at a faster rate than revenue passenger kilometres (RPK). For 9MFY11, the number of passengers carried rose to 13.1 million (+13%), or 73% of our full-year forecast of 18 million passengers. Load factor improved by 6.4% to 79.9%, as RPK expanded at a faster pace of 17% y-o-y, compared with the 7.7% increase in ASK.
The positive impact from the improvement in operating statistics will be partially offset by the spike in jet fuel prices. In 3QFY11, the average jet fuel price was US$125 per barrel, some 45% higher than the US$87 per barrel average in 3QFY10. Although the price has eased from the peak of US$140 per barrel, it remains high at around US$120 per barrel, as the crack spread continues to widen from an average of US$10 per barrel to about US$40 per barrel currently.
We make no changes to our average jet fuel assumptions of US$110 per barrel in FY11 and US$115 per barrel in FY12 and FY13. Given the slower global growth and continued de-leveraging risk, we think there is downside potential of jet fuel cost.
In 3QFY10, AirAsia’s ancillary income per pax was RM44, some 14% lower than 2QFY11’s RM50. AirAsia targets to grow this to RM60 per pax, driven by its joint ventures; Internet travel portal Expedia and Canada’s CAE for flight training. The collaboration with MAS is expected to lead to cost savings through various divisions including engineering and maintenance of aircraft, academy facilities and supply of meals.
Last week, AirAsia received consent from its financiers to transfer five of its aircraft to Indonesia AirAsia (IAA) (51%-owned). The financing facilities shall also be restructured to reflect the aircraft transfer. The total consideration for the transfer of the five aircraft is approximately RM550.8 million.
The one-off disposal gain from the transaction is about RM49.7 million, which translates into two sen per share. This will be reflected in its 4QFY11 earnings.
We are positive on this development as it indicates a step closer to the listing. IAA is targeted to list in 2012. — Affin IB Research, Nov 2
This article appeared in The Edge Financial Daily, November 3, 2011.
Maintain neutral with target price RM3.45: AirAsia is scheduled to release its 3QFY11 results on Tuesday. Based on its July to September operating statistics, we expect 3QFY11 figures to come in flat on a quarter-on-quarter (q-o-q) basis but higher year-on-year (y-o-y).
In 3QFY11, AirAsia carried 4.3 million passengers, 3% lower q-o-q but 7.6% up y-o-y. Load factor in 3QFY11 fell marginally by 3.7 percentage points to 77.9% as available seat kilometres (ASK) expanded at a faster rate than revenue passenger kilometres (RPK). For 9MFY11, the number of passengers carried rose to 13.1 million (+13%), or 73% of our full-year forecast of 18 million passengers. Load factor improved by 6.4% to 79.9%, as RPK expanded at a faster pace of 17% y-o-y, compared with the 7.7% increase in ASK.
The positive impact from the improvement in operating statistics will be partially offset by the spike in jet fuel prices. In 3QFY11, the average jet fuel price was US$125 per barrel, some 45% higher than the US$87 per barrel average in 3QFY10. Although the price has eased from the peak of US$140 per barrel, it remains high at around US$120 per barrel, as the crack spread continues to widen from an average of US$10 per barrel to about US$40 per barrel currently.
We make no changes to our average jet fuel assumptions of US$110 per barrel in FY11 and US$115 per barrel in FY12 and FY13. Given the slower global growth and continued de-leveraging risk, we think there is downside potential of jet fuel cost.
In 3QFY10, AirAsia’s ancillary income per pax was RM44, some 14% lower than 2QFY11’s RM50. AirAsia targets to grow this to RM60 per pax, driven by its joint ventures; Internet travel portal Expedia and Canada’s CAE for flight training. The collaboration with MAS is expected to lead to cost savings through various divisions including engineering and maintenance of aircraft, academy facilities and supply of meals.
Last week, AirAsia received consent from its financiers to transfer five of its aircraft to Indonesia AirAsia (IAA) (51%-owned). The financing facilities shall also be restructured to reflect the aircraft transfer. The total consideration for the transfer of the five aircraft is approximately RM550.8 million.
The one-off disposal gain from the transaction is about RM49.7 million, which translates into two sen per share. This will be reflected in its 4QFY11 earnings.
We are positive on this development as it indicates a step closer to the listing. IAA is targeted to list in 2012. — Affin IB Research, Nov 2
This article appeared in The Edge Financial Daily, November 3, 2011.
