Period

4Q15/FY15.

Actual vs. Expectations

AIRASIA’s FY15 CNP of RM719.9m beat our and streets’ full-year estimates by 11% and 8%, respectively. Our CNP was derived after excluding the losses of its associates, forex, and maintenance reserve fund.

The positive variance was attributable to betterthan- expected yield of 12.2sen/RPK vis-à-vis our assumption of 11.1sen/RPK.

Dividends

No dividend declared, as expected.

Key Results Highlights

YoY, its FY15 CNP registered a stellar growth of 104%, mainly driven by the improvements in yield (+10%) which further boosted its passenger revenue by 22%. That said, its CASK was down by 4% driven by reduction in fuel costs (-11%).

QoQ, 4Q15 CNP seen an improvement of 53%, was also lifted by improvements in yield (+9%), underpinned by 12% increase in average fare coupled with a higher passenger load factor of 84% (previously, 81%). Its ancillary income per pax also increased by 6%.

Outlook

Moving forward, we believe that should the yields are maintained at current levels, AIRASIA will continue to benefit from lower jet fuel costs. While its associates are seeing improvements on QoQ basis, we believe 2016 will be a challenging year administratively which AIRASIA needed to strive for consolidation of its accounts providing better transparency of its business and related-party transactions between associates.

Forecasts

We raised our FY16E CNP by 5% to RM810m, after fine tuning our yield assumptions higher to 12.2sen/RPK, and introduce our FY17E CNP of RM825.9m.

Rating

Maintain OUTPERFORM

Valuation

We are reiterating our OUTPERFORM call on AIRASIA with an unchanged Target Price of RM1.86 based on 1.0x FY16E PBV (5-year Fwd -1.5SD). Our TP implies a FY16E PER of 6.4x.

Risks to Our Call

Sharp decline in airfares on intensified price war.

Sharp fluctuation in currency and fuel price.

War, global political risk, pandemic.

Source: Kenanga Research - 29 Feb 2016