AirAsia (Buy)

Higher Yields offset higher fuel cost

• In line with HLIB’s expectations and consensus.
• Reported 1Q12 core profit of RM153.5m, achieving 15% of HLIB’s full year FY12’s RM1bn. 1Q is seasonally weak quarter, which had contributed 13-17% of full year in FY10-11.
• Passenger yield improved slightly by 1.8% yoy to 14.2sen.
• Ancillary income remained stable qoq at RM39.6/pax.
• Net Gearing improved to 1.26x ( vs previous quarter of 1.42x).
• AirAsia recorded maiden profit recognition of RM2.3m from Thai AirAsia (TAA) after the unit successfully turnaround. TAA will be listed on 31 May 2012.
• Indonesia reported loss due to low seasonality. Management remained bullish on the country. Targeting to list the unit by end 2012.
• Philippines AirAsia and Japan AirAsia are tartgeted to breakeven after first year of operation.
• Maintain Buy with unchanged TP of RM4.70.

Source: Hong Leong Investment Bank Research - 24 May 2012