AIRASIA Analysis:-

Excel – http://1drv.ms/1nq6DVs

My View:-

- Fair Value
  – Absolute EY% Valuation
    – Trailing:   
      – FY13 (EPS: 0.13) – Buy below 1.55, sell above 2.16 (MOS: -10.6%)
      – R4Q (EPS: 0.283) – Buy below 3.38, sell above 4.7 (MOS: 49.2%)
    – Forward:   
      – FY14 (EPS: 0.205) – Buy below 2.45, sell above 3.41 (MOS: 29.9%)
      – FY15 (EPS: 0.265) – Buy below 3.16, sell above 4.4 (MOS: 45.6%)
    – EPS applied to reach the current stock price (2.39): 0.144   
- I believe that FY2014 would be a better year as compared to 2013, with the expectation that yield would recover and its cost savings initiatives would boost earnings.
- On the other hand, MAS and AIRASIA have guided that domestic and intra-ASEAN fares are unlikely to decline further from the already-low levels, but fares are unlikely to rise either, as capacity deployment over the next six months will be kept at present levels and there is no evidence of capacity rationalisation. As the weak 4Q13 fares carry over into 2014, some analysts expect MAA to experience an average 5% underlying yield compression in 2014, leading to a 26% core net profit decline. To make things worse, Thai AirAsia’s profit is likely to shrink and Indonesia AirAsia’s losses expand further this year. Thus, the analysts expect AirAsia’s group core net profit to fall a massive 43% yoy in 2014. The outlook may improve in 2015-16 as the losses are unsustainable for MAS and Malindo. I also conquer with their view.
- Besides, further decline in pax yield and lower contributions from the overseas associates are expected for FY14 and FY15.
- AirAsia has told Bursa Malaysia that it is proposing to buy up to 10% of its issued and paid-up share capital at any point in time. The proposed share buyback, if implemented, will enable AirAsia and its subsidiaries to utilise any of its surplus financial resources, which are not immediately required for other uses, to purchase its own shares from the market, the company said. The proposed share buyback is expected to stabilise the price of AirAsia shares and to prevent against speculation of the shares, when undervalued, to enhance investors’ confidence. (27 Feb 2014)
- Analysts expect 2H14 to be better as the losses of its overseas associates in Indonesia and Philippines bottoming out in 2Q14. AirAsia would benefit from MAS’ restructuring should the latter trim down common routes which AirAsia also operates.
- I have accumulated AIRASIA 3 times in Dec 2013 and Jan 2014 in the range from 2.3 to 2.4, so I won’t accumulate AIRASIA in near term or until it formed a new higher support.

Latest Financial – Q2 2014 Financial Report (20 Aug 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1715569

At the time of writing, I owned shares of AIRASIA.

http://lcchong.wordpress.com/2014/08/24/airasia-fundamental-analysis-24-aug-2014/