We revise our yield assumptions for AirAsia X (AAX) as we anticipate the pickup in yields from mature routes to be capped by new route launches. Accordingly, we trim our FY13/14 earnings by 24/30% respectively. Maintain BUY, with a lower MYR1.31 FV (from MYR1.60), premised on unadjusted FY14 EV/EBITDAR of 8.5x.
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On the prudent side. After the analysts’ teleconference call with AAX’s management yesterday, we decide to remain conservative and toned down our yield assumptions. While competition is less severe in the long-haul space, we foresee AAX’s new route launches at promotional fares could cap upside for overall yields. Our yield growth forecasts for FY13/14 have been trimmed by 1.0/1.5 sen to 9.5/10.0 sen respectively.
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Briefing takeaways. AAX will continue to increase flight frequencies to retain its market leadership position. With respect to its new hubs, management guided that Thai AirAsia X (TAAX) is expected to commence operation by 1QFY14 and will subsequently start another hub in Bali by year-end. Management hinted at the likelihood of TAAX incurring start-up losses of MYR20-30m in FY14-15F. On its investment allowance, management guided AAX will receive MYR98m annually for FY13-14F, which we are now factoring into our earnings forecasts. Further cost savings are expected to be realised once KLIA2 becomes operational next year.
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Forecasts. We incorporate lower yields and slash our FY13/14 earnings by 24%/30% respectively. We are also factoring in TAAX’s potential startup losses, as we had earlier only conservatively projected that its Bangkok hub would commence operation in mid-2014 as opposed to its 1Q14 target. We have not factored in TAAX’s Bali hub into our estimatespending regulatory approval. However, we suspect its Bali operation could see more modest losses compared to Bangkok given the former’s cheaper cost base.
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Maintain BUY. Following our earnings revision, we reduce our FV for AAX to MYR1.31 (from MYR1.65), pegged to 8.5x FY14F adjusted EV/EBITDAR. However, we now switch our Top Pick to AirAsia (AIRA MK, BUY, FV: MYR3.70), following its better-than-expected 9MFY13 earnings.
Financial Exhibits
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As AAX qualifies for tax incentives on certain expenditure, we incorporate that into our model
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We also factored in the potential start-up losses of MYR25.0m (AAX portion) for its Thai AirAsia X operation, which is expected to kick off in 1QFY14
SWOT Analysis
Company Profile
AirAsia X is the long-haul low-cost carrier of the AirAsia Group. The airline flies to 16 destinations to/from cities in Australia, Japan, Korea, Taiwan and China. It also flies to Kathmandu, Nepal and Jeddah, Saudi Arabia.
Recommendation Chart
Source: RHB
sephiroth
rhb rpt really tak boleh pakai, 1 day difference, slash 30% from tp
2013-11-21 11:22