Despite flattish numbers from its Indonesian business, AirAsia Group's 3Q operating stats were commendable, led by Thailand's stellar growth on aggressive expansion. With yields expected to climb 6% y-o-y following MAS' exit from the LCC space, we estimate that AirAsia will record revenue of RM1.24bn and a core net profit (inclusive of its associates) of RM225.3m, representing a y-o-y increase of 15% and 17% respectively. We keep our earnings forecast on AirAsia with our FV unchanged at RM3.91. Maintain BUY.
Commendable stats. 3Q operating stats for the AirAsia Group were commendable, although its Indonesia side reported flattish numbers as it was operating a smaller fleet with one aircraft less compared to the corresponding period last year. Meanwhile Thailand reported a stellar growth due to its aggressive expansion, as it added four additional aircraft. Malaysia AirAsia (MAA), Indonesia AirAsia (IAA) and Thai AirAsia (TAA) reported Revenue Passenger KM (RPK) growth of 8.8%, -0.3% and 14.7% y-o-y respectively, on the back of a load factor of 76.7% (-0.8ppts y-o-y), 77.6% (-0.2ppts) and 81.7% (+2ppts). On a YTD basis, the RPK numbers reported by MAA, IAA and TAA were up 8.1%, 3.4% and 14.6% respectively. On a q-o-q basis, it was seasonally weaker for MAA due to Ramadhan celebration, although this was not the case for Indonesia and Thailand. Indonesia typically records stronger traffic during Ramadhan given its massive nationwide exodus, while improved summer travel demand will spur Thailand's traffic.
Within forecasts. MAA's 9M YTD traffic came in marginally better than our forecast at 74% of the full-year RPK, compared with 73% in the year-ago period. This is likely the result of its focus on shortening the average stage length. For IAA and TAA, the numbers were also in line. Average stage lengths for the three carriers were lower by 1.1%, 8.9% and 5.0% respectively from last year, suggesting that aircraft utilisation were optimised for shorter routes which are mostly domestic. This bodes well for yields and margins (from higher ancillary revenue turnover), and ultimately profitability.
3Q earnings outlook. With yields expected to be higher by 6% y-o-y (at 19.9sen/RPK), thanks to MAS' exit from the LCC space, we estimate that AirAsia will record a revenue of RM1.24bn and a core net profit (inclusive of its associates) of RM225.3m, representing y-o-y increases of 15% and 17% respectively.
Maintain BUY. We keep our earnings forecast on AirAsia with our FV unchanged at RM3.91 premised at 12x PE. Maintain BUY.
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