Saturday, November 30, 2013

AirAsia X - Weak 3Q profits (CIMB)

AirAsia X Bhd -
Current RM1.04
Target RM1.23
Weak 3Q profits

AAX reported a 3Q13 core net profit of RM7m, which was below expectations as it failed to recoup the RM26m loss of the immediately preceding 2Q due to lower-than-expected yields. The 9M13 core earnings of RM22.8m were only 24% of our full-year estimate. As a result, we may cut our FY13 EPS forecast by up to 25% after tomorrow's analyst call, and also reassess our forecasts for FY14-15. We maintain Neutral and our target price for now (based on the sector average of 11x CY15 P/E), but highlight that these may also be reduced.


As a result, we may cut our FY13 EPS forecast by up to 25% after tomorrow's analyst call, and also reassess our forecasts for FY14-15. We maintain Neutral and our target price for now (based on the sector average of 11x CY15 P/E), but highlight that these may also be reduced.

Highlights of 3Q13
In terms of seasonality, the rule of thumb for AAX is that 3Q profits should slightly more than recoup 2Q losses, but this failed to happen this year. AAX implemented "promotional campaigns for both matured and newly-launched routes" which caused 3Q13 overall yield to decline 1.6% yoy and RASK to fall 2.7% due to a 1% pt reduction in loads. This yield decline on mature routes may be due to competitive pricing by MAS, and the yen and A$ weakness. Cheap fares on new routes to Shanghai and Busan also brought down the average. The underlying passenger yield fell 3.3% yoy, and the impact on AAX would have been worse had it not succeeded in pushing up ancillary yield by 5% on price revisions, higher Fly-Thru take-up and new products. Despite the yield fall, 3Q13 revenue was up 24% yoy on a 30-32% rise in ASK and RPK as the fleet expanded. But 3Q13 core net profit was down 43% yoy.

Costs did not help
The 3.8% ringgit depreciation was unhelpful since two-thirds of AAX's costs are US$-linked. Fuel price also rose 4.7% yoy on average. Fortunately, AAX booked RM11m in other income from airport incentives and sale and leaseback of engines during 3Q13. AAX charged RM7.6m into the 3Q as cost of free tickets for IPO investors, RM4.5m in IPO costs and RM15m in unrealised forex losses, which we have all classified as exceptionals.

TAAX losses to affect 2014
AAX has invested RM20m in its 49%-owned Thai AAX, which aims to start operations next year. We have forecast RM22m as AAX's share of losses for 2014.



Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 20/11/13

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