We expect AirAsia's 4Q earnings to soar on the back of strong RPK growth and load factor amid seasonally higher yields and flat jet fuel price. We maintain our BUY call on the stock, with our FV unchanged at RM3.39, premised on 11x FY13 earnings. Incorporating the market caps of Asia Aviation and the group's insurance arm, AirAsia is trading at a cheap 7.4x PE vs its historical and peers average of 10x and 12x respectively.
Encouraging numbers so far. In 4QFY12, Malaysia AirAsia (MAA), Thai AirAsia (TAA) and Indonesia AirAsia (IAA) reported that revenue passenger kilometres (RPK) grew by 7.8%/22.5%/10.9% respectively y-o-y. The encouraging numbers were due to seasonally stronger year-end air travel demand. Meanwhile, the full-year RPKs of MAA/TAA/IAA jumped 8.1%/16.6%/5.2% respectively, with load factors coming in at 79.5%/82.3%/77.1%. Overall, the numbers from all three of the group's country hubs came in well within our estimates. Following the introduction of five new routes in 4Q amid high seasonal demand, MAA's load factor during that period hit 82.1%, its highest quarterly number since the 82.3% recorded in 4Q2011. The new routes are all international destinations - three to China (Kunming, Guangzhou and Nanning) and two to Indonesia (Solo and Lombok). We
gather from management that the December 2012 load factor was also an all-time high. We note that the q-o-q air travel momentum in 2012's final quarter had remained resilient.