Airasia X Berhad - To Get Off To A Good Start

Date: 02/05/2017

Source  :  PUBLIC BANK
Stock  :  AAX       Price Target  :  0.53      |      Price Call  :  BUY
        Last Price  :  0.28      |      Upside/Downside  :  +0.25 (89.29%)

AirAsia X (AAX) is scheduled to release its 1QFY17 results and passenger yield data on 23rd May 2017. Last Friday, it announced its preliminary operating statistics, which were within our expectations, with a laudable growth of 32.9% YoY in traffic volume to 6.99bn revenue-passenger-kilometres (RPKs). AAX delivered strong load factor for 1QFY17 at 84.2% (4Q16: 81.1%). We expect AAX to have another good start for the year. We reiterate our Outperform call on AAX, with unchanged target price of RM0.53 based on 8x FY18F EPS.

  • 1QFY17 operating statistics was within expectations. During 1QFY17, AAX’s passengers carried increased by 32.9% YoY to 1.4m, exceeding available seat kilometre (ASK) growth of 29.3% to 8.3m. It was within our expectation, accounting for 25% and 24% of our full year forecast respectively. Consequently, Malaysia AAX’s (MAAX) load was higher at 84.2% (vs. 4QFY16: 81.1%), i.e. second highest since its last high at 86.0% in 1QFY14. Passenger traffic volume rose to 6.99bn revenue passenger-kilometres (RPKs) due to strong traffic demand across all segments. Although MAAX did not add new fleet during the quarter, it managed to increase its flight frequencies to Tehran and introduce new route to Wuhan, following its strategy to improve aircraft utilisation. (Table 1)
  • Associates performance. Management guided that Thailand AAX (TAAX) has delivered a strong passenger load at 94% level in 1QFY17, on the back of no additional capacity added during the quarter. Meanwhile, Indonesia AAX (IAAX) services were still temporarily suspended. Nevertheless, the 2 aircraft in IAAX are temporarily wet-leased to Malaysia AirAsia (MAA). We noted previously that it has plans to resume its operations by early 2H2017 and will be launching new route Denpasar Narita this end-May 2017.
  • We reiterate our Outperform call on AAX as we believe the positive performance is likely to flow through from FY17 onwards as a result of (i) better cost efficiencies through improvement in aircraft utilisation and increase in route frequencies, (ii) improve performance from associates, (iii) less impact on fuel price volatility, and (iv) lower net gearing.

Source: PublicInvest Research - 2 May 2017

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