Saturday, November 23, 2013

AirAsia - Don’t Mess With the Captain (MKE)

AirAsia -
Buy(from Hold)
Share price: MYR2.51
Target price: MYR2.80(from MYR2.90)
Don’t Mess With the Captain

Slightly below. AirAsia’s 9M13 core net profit of MYR383.0m (-15.5% YoY) makes up 62% of ours and 51% of full year 2013 consensus. The Malaysia and Thai airlines performance performed as expected, but the Indonesian and Philippine units underperformed. Other associates have shown impressive recovery. We cut our FY13-15 earnings by -10.5% / - 15.9% / -15.3% to factor in the latest capacity rollout and business outlook. We rollover the base year to 2014, and upgrade the stock to a BUY (from Hold) with a marginally lower target price of MYR2.80/share (-3%). This is based on the global LCC’s average PER of 11.0x.

Some positives. The Group’s 3Q13 core net profit of MYR146.5m (- 11.6% YoY, +41.0% QoQ) is slightly below our forecasts, but significantly below consensus. The takeaway is that AirAsia can hold its ground against the fare war that is plaguing the domestic Malaysian market. Yields declined by 6.5% YoY, but profit margins only contracted by 1.1ppt as the Company managed to reduce unit cost by 6.4% thanks to lower fuel cost and economies of scale benefit.

Fare war is being managed well. The fare war in domestic Malaysia remains fierce and is not going away in a hurry. Both MAS and Malindo are deploying massive capacity and gaining market share at AirAsia’s expense. However, AirAsia is not reacting and keeping to its modest 11% YoY capacity gain, and this has proven to be the right strategy as its yield deterioration of 6.5% YoY is the lowest decline among the industry. Assuming management maintains this discipline, AirAsia will persevere the fare war with only a minor dent in its profits and margins.

BUY, stock is indeep value. The share price has declined by 16% since August, and is exhibiting deep value. The fare war is a concern and it is difficult to pinpoint exactly when it will unfold; but the moment it does, AirAsia’s share price will reach the orbit. AirAsia’s share price might see a sell down today due to the poorer results and imminent consensus rebasing. We think this is a great time to accumulate.

Source/Extract/Excerpts/来源/转贴/摘录: MKE-Research,
Publish date:21/11/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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