Period     1QFY13 / 3MFY13

Actual vs. Expectations   AirAsia’s 1QFY13 core net profit of RM155.9m came in within our expectations and streets estimates, making up 18% and 17% of ours and streets estimates full-year estimates, respectively. We deem that the results are inline given that 1Q13 is usually a seasonally slower quarter.

Dividends    No dividends declared as expected.

Key Results Highlights     QoQ,  core earnings dipped significantly by 59% from RM380.5m to RM155.9m on the back of a drop in revenue of 8%. Its average fare per passenger was down by 13% to RM153 mainly due to a seasonally slower quarter as compared to the peak period in 4Q12.

YoY, AirAsia’s revenue improved by 11% backed by a higher contribution from its ancillary income (i.e. baggage, Assigned seats/hot seats and freight) and fuel surcharges. Ancillary income charges per pax saw an increase of 5% from RM40 to RM42. However, its core earnings was down marginally by 5% as its fuel, maintenance cost and depreciation saw an increased by 18%, respectively.

Outlook    Moving forward, we would expect better earnings from AirAsia in the upcoming quarters due to public holidays, post effect from the recent concluded General Election and also positive contributions from its associates namely TAA, IAA and PAA. 

Change to Forecasts   No changes to our earnings estimate.

Rating  Downgrade to MARKET PERFORM

Downgraded to MARKET PERFORM from OUTPERFORM given the limited upside to our newly derived TP of RM3.36.

Valuation     Raised TP to RM3.36 based on 10.5x FY14 PER (previously, RM3.23 based on 10.5x FY13 PER), as we have rolled forward our valuation to FY14.

Risks    A spike in average jet fuel price above USD130/barrel.

Source: Kenanga