The AirAsia journey continues to excite many investors with the share price gaining an additional 2.6% to RM2.34 on Thursday. In May alone, the share price has surged a whopping 23.2%! Call warrants listed over AIRASIA followed closely with AIRASIA-C29 gaining 225%.
Ahead of AirAsia’s 1Q16 results due at the end of this month, Macquarie Equities Research (MQ Research) has revised the target price (TP) of the low-cost airline from RM3.00 to RM3.50. Find out why below..
Event
Impact
MQ Research estimates AirAsia will report an adjusted profit of ~RM265m (+88% YoY) in 1Q16, 25% of MQ Research’s FY16E, but representing 32% of consensus estimates. MQ Research expects revenue growth of 19% in the quarter will be driven by a 26% revenue passenger per kilometer (RPK) growth. A pax yield decline of 3% is expected given the current weak yield environment. MQ Research are expecting unit cost (CASK) to remain flattish given the Ringgit weakened on average 14% YoY pcp. MQ Research expects AirAsia to deliver an EBITDA of ~RM530mn (+25% YoY). Thai AirAsia’s profit of RM95mn is expected to be higher than the losses at its Indonesian and Indian associates. MQ Research forecast its Philippines associate to turn profitable in 1Q16.
2016 is turning out well for AirAsia, in MQ Research’s view. AirAsia is delivering faster passenger growth than the industry as evidenced by its 1Q16 operating statistics released earlier this month, which supports MQ Research’s trade down thesis. With 70% of its 16E fuel requirement being hedged at US$55/bbl, a 1% strengthening of the Ringgit could increase 16/17E profit by 1.1-2.0%. The decision by its competitor Malindo Air to become a full service airline MQ Research believes will mitigate downward pressure on yields. MQ Research assumes yields will fall by 2% in FY16E. An uplift in the bottom-line to be driven by cash unit cost reduction of 10%.
A faster pax yield decline than expected is the biggest risk to MQ Research’s recommendation in MQ Research’s view. Asean carriers reported -14% to +5% yield change in FY15A. MQ Research believes other key downside risks are non-payment from Indonesia AirAsia’s local shareholder for its portion of the perpetual bond, stronger dollar and demand slowdown.
Earnings and target price revision
Price catalyst
Action and recommendation
Source: Macquarie Research - 20 May 2016
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Ah Plane Manager...
I am so sad now. No mood to chat with you anymore. My Malaysia team defeated in semi final Thomas cup...
Haih.... Lose out Thomas cup Liao...mood less
2016-05-21 23:02
Bro duit, forget about Thomas cup, 2nd double cannot finish it, too old maybe. Let move on. From the stock pick, understand u invest in reit. Which reit that most promising whereby price is stable with potential slightly up n highest dividend? Mqreit, ytl reit or igb reit?
2016-05-21 23:44
Buy buy buy, pls buy so everyone can follow paperplane............ to holland...... to visit icon8888
2016-05-22 01:12
Jonathan Keung
a good article on AA group from Macquarie Research
2016-05-20 09:11