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AirAsia - 4Q12 results above expectations

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Publish date: Wed, 27 Feb 2013, 11:59 AM
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Period  4Q12/12M12

Actual vs. Expectations  FY12 core net profit of RM838m came in higher than our expectations and the consensus by 10% and 17% respectively. This was due to a higher other and ancillary income due to the new baggage charges.

Dividends    Surprisingly, AirAsia has declared a special single tier dividend of 18 sen and final single tier dividend of 6 sen. A 20% dividend policy was also established commencing FY13.

Key Result Highlights  The FY12 core net profit increased by only 5% despite of stronger 12% increase in the revenue. This was due to the higher increase in its fuel cost (+15%), staff cost (+21%) and maintenance and aircraft related cost (+72%). The significant increase in the maintenance cost was mainly due to a schedule check-up for the existing fleet.

 YoY, with the seasonally strong period in the 4Q, the core net profit grew by 36% to RM380m. However, the significant increase was more mainly due to the revision of its baggage charges. The ticket sales for the period increased marginally only by 3% as compared to the increase in the ancillary income by 17%.

 QoQ, the core net profit increased by more than one-fold due to the seasonally strong quarter for AirAsia and the airline industry in general. Both its ticket sales and ancillary income was up by 14%.

Outlook  Malindo's entry to the Malaysian skies will be the immediate treat for AirAsia while the risk of a higher fuel cost is still high in 2013.

Change to Forecasts  We have revised our FY13 earnings higher by 5% as factored in higher ancillary income.

Rating  Upgrade to OUTPERFORM.
 We have upgraded our rating on AirAsia to an OUTPERFORM as the share price now offers a c.22% upside to our target price. We expect the dividend announcement to be welcomed positively by investors.

Valuation  We have revised our target price higher to RM3.23 from RM3.07 based on an unchanged 10.5x PER of its FY13 earnings.

Risks  An average jet fuel price above USD130/barrel and lower than expected margin contraction.

Source: Kenanga
CAPITALA (5099)
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