INVESTMENT HIGHLIGHTS

• FY17 ASK grew +19.0%yoy

• ASK growth from increased frequency

• Load factor improved to 83.0%

• Target price of RM0.43 unchanged pending full year results FY17

ASK grew +19.0%yoy. In 4QFY17, AirAsiaX’s ASK increased +8.0%yoy and mostly flat from 3QFY17. ASK expansion in 4QFY17 led to an overall increase of +19.0%yoy for FY17.

ASK growth from increased frequency. While fleet size remained at 22 A330s as of last year, ASK continued to grow in 4QFY17 from added frequencies to five routes in total, namely Xi’an, Sapporo, Incheon, Busan and Taipei. Comparatively in 3QFY17, the company only added frequency on one route to Taipei. We opine continuous frequency in Taipei was in line with the company’s strategy to strengthen the North Asia market. As of December last year, the company also saw an addition of unique route to Jeju.

Load Factor recorded at 83.0%. In 4QFY17, the company’s load factor improved by +2.0ppts yoy to 83.0%, despite a notable jump in ASK. During the same quarter, AirAsiaX’s RPK increased +23.0yoy while recorded +4.3%qoq in light of seasonally stronger quarter. On annual basis, load factor improved by similar pattern, inching up by +3pptsyoy to 82.0%.

Recovery of AirAsiaX Thailand, as load factors ticked up +13ppts yoy in 4QFY17 to 91.0%. This was attributable to the recovery from short-term impact on the tourism sector due to the passing of King Bhumibol Adulyajed, ninth king of the Chakkri dynasty. During the quarter, AirAsiaX Thailand increased frequencies on two routes, with fleet size remained at 6 aircrafts.

Possible upward revision to our forecast. We expect that 4QFY17 earnings will be strong. However, due to the 9MFY17 net loss, earnings in FY17 will be lower than FY16. In addition, its share price has run-up by +15.8% since last report issued. As such, we maintain our BUY call and we are not revising our FY18 and FY19 earnings forecast, pending its FY17 earnings release next month. Hence, we maintain our TP at RM0.43 pegging its FY18 EPS to a forward PE of 8.5x.

Source: MIDF Research - 29 Jan 2018