PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 17 Jun 2019, 12:08 PM


AirAsia X Berhad - Boosted By Forex Gain From MFRS 16

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AirAsia X (AAX) reported a 1QFY19 net profit of RM43.3m (+4.4% YoY). Excluding forex gain and deferred tax, it reported a core net loss of RM30.1m however. The results were below our and consensus’ profit estimates of RM97m and RM60m respectively, due to the adoption of MFRS16 which brought traditionally off-balance sheet long term commitment items to be reflected in the financial statements. Accounting treatment for operating leases will now be reflected as the same like for finance leases. We cut our FY19-21F earnings by an average of 56% to factor the impact of MFRS16 adoption, which now results in higher finance cost. Our target price is revised lower to RM0.21 as a consequence (previously RM0.23), as we also roll-over our valuation to 10x FY20 EPS. We maintain our Neutral call on AAX.

  • Lower YoY revenue. AAX reported a decline in 1Q19 revenue by 8% YoY to RM1.17bn. This was on the back of lower average base fare by 3% YoY to RM513/pax due to shorter stage routes of 4,791km (vs 4,809 km in 1Q18) following the termination of Tehran, Kathmadu, Male and Auckland routes. It also carried fewer passengers (-5% YoY) during the quarter, in-line with the drop in available seats per km (ASK) growth of -5% YoY. Meanwhile, aircraft utilisation was also lower at 14.6 hours/day (vs 16 hours/day in 1Q18) as a result of on-going route realignment. AAX expects to increase the aircraft utilisation to at least 15 hours/day going forward through ongoing capacity realignment. (Table 3).
  • Lower CASK. AAX reported lower cost per average seat km (CASK) by 3% YoY to 12.89sen as a result of lower average fuel price during the quarter. This lowered its fuel expense by 12.5% as the fuel price fell to USD79/bbl from USD88/bbl in 1Q18. Excluding fuel, CASK was relatively flat YoY at 8.16sen, mainly due to (i) higher depreciation after adjusting for MFRS16 (+94%), and (ii) higher maintenance and overhaul cost (+22%) due to two new aircraft delivery to Malaysia (MAAX) at the end of FY18. Nevertheless, this is off-set by lower user charges (-14%) as well as the absence of aircraft operating lease expenses post-MFRS16, the latter now being treated as finance leases. Overall, AAX reported a net profit of RM43.3m, partially boosted by forex gain of RM89m, with EBITDA margin jumping to 22.6% (vs 8.2% in 1Q18). To-date AAX has hedged about 51%-53% of its fuel price in FY19 at USD77-81/bbl. (Table 1-5)
  • Associates’ performance. Thailand (TAAX) reported a net profit of USD12m for 1Q19 mainly due to healthy routes’ performance and steady load factor at 90%. Its tourism sector is expected to be boosted in 2Q19 on the back of extended Visa on Arrival fee waiver as the government plans to stimulate demand for international inbound travel to Thailand. Meanwhile Indonesia (IAAX) plans to place its two aircraft on wet-lease arrangement with an identified third party from July 2019. Currently, the aircrafts remain grounded.

Source: PublicInvest Research - 17 May 2019

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