Watch Out For Yields
AIRA’s 2QFY13 earnings are expected to be within our estimates, with core earnings likely to inch higher (+3% q-o-q; +5% y-o-y). Yields may face competitive pressure, although 2Q passenger volume has grown. BUY call on AIRA maintained and MYR3.94 FV unchanged, premised at 13.0x FY14F P/E – in line with the average multiples of its peers.
- Earnings to be satisfactory. AIRA is expected to announce 1HFY13 earnings on 21 Aug after market close. We expect its numbers to be satisfactory and within our expectations.
2QFY13 earnings are likely to inch higher 3% q-o-q and 5% y-o-y on the back of revenue growth of 4% and 10% respectively. The main highlight to watch for is how AIRA’s yields will fair due to Malindo’s emergence in the domestic low cost carrier space. We expect yields to start seeing pressure – dropping by 4% – although this will be offset by higher ancillary revenue per pax, thus narrowing the drop in overall FY13 yields to 2%. However we expect the yields downside to be mitigated by higher associate profits and lower fuel costs, as jet fuel came in lower y-o-y and q-o-q by 7.0% and 10.0% respectively.
- 2QFY13 operating statistics within expectations. Despite competition from Malindo – which commenced operations in late March – AIRA continues to report passenger numbers growth in 2QFY13. Revenue passenger kilometre (RPK) grew (+5.6% q-o-q; +12.7% y-o-y) while aintaining its number of aircraft at 66, thus giving boost to its load factor to 79.9% (78.5% previously). YTD, 1HFY13 RPK accounted for 48% our FY13 estimate, which is deemed within expectations. 2QFY13 growth was attributed to higher flight frequency to Kuching, Bintulu and Langkawi on the domestic side, and Kuala Lumpur to Tiruchirappalli (India) and Lombok (Indonesia) internationally.
- Maintain BUY. We are comfortable with our earnings forecast, which remains unchanged. We maintain our BUY call on AIRA with our FV intact at MYR3.94, premised at 13.0x FY14F P/E, which is the average peers multiple. To add on, the listing of associate Indonesia AirAsia (IAA) sometime in 4QCY13 or 1QCY14 will crystallise valuations. On a RNAV basis, pricing in the valuation of AIRA’s listed holdings, the carrier is valued at MYR4.04 – IAA’s valuation not priced in.
Publish date: 16/08/13