Period     2Q13 / 1H13

Actual vs. Expectations   AirAsia’s 1H13 core net profit of RM298.4m makes up 34% of both our and street’s estimates. We deem the results as broadly within expectations given that the first half of the year is seasonally slower. 

Dividends    No dividends were declared as expected.

Key Results Highlights   Flattish 1H13, AirAsia’s 1H13 core net profit dipped marginally by 1% to RM298.4m despite an 8% improvement in revenue as it was offset by higher depreciation and financing cost, which increased by 21% and 24% due to 2 additional new aircrafts that were delivered in 1H13.

QoQ, AirAsia managed to improve its load factor slightly by 1ppt to 80% despite a 3% increase in capacity in 2Q13. However, its core earnings slid by 9% to RM142.6m as its yield slumped 12% to 11.5 sen/RPK due to increased competition in the aviation industry.

YoY,  its revenue improved by 5% backed by a better 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 6% from RM37 to RM39. This time around its associates also contributed positively with RM13m contribution vs a loss of RM8.4m in 2Q12, lifting its core earnings by 4% from RM137.0m to RM142.6m.

Outlook    Moving forward, we would expect stronger earnings in 2H13 from AirAsia due to more public holidays traveling, post-general election impact and also positive contributions from its associates namely TAA. 

Change to Forecasts   No changes to our earnings estimate.

Rating  Maintain OUTPERFORM

Valuation     We maintain our TP of RM3.51 based on an unchanged 11x FY14 PER.

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

Source: Kenanga