Fernandes claimed that AirAsia X was
KUALA LUMPUR: Maybank Investment Bank Research forecasts Air Asia X to deliver respectable profit growth in FY18-19 on improving operations.
In its research note on Thursday, it however notes that AAX is exceptionally sensitive to fuel price volatility due to its long average stage length of 4,868km (longer flight requires more fuel) and it has only hedged 15% of its 1H18 needs.
“A US$1/bbl change in average fuel price will move our FY18-19 earnings by 16% and 14% respectively. Valuation wise AAX is trading close to fair value and hence it is a Hold,” it said.
Maybank Research raised the target price by 3% to 38.5 sen (last traded price 41 sen) based on an unchanged eight times 2019 price-to-earnings ratio (PER), which is the lower-end of the typical airline cycle of eight to 15 times. It maintained its Hold call.
AAX’s FY17 core net profit was RM85.5mil (-58.4% on-year) after adjusting for one-off items, forex-translation and AAX’s share of losses in associates.
“This was ahead of our expectation but below consensus. We raise our FY18-19 earnings forecasts by +10.4% and +5.5% on latest cost parameters.
The research house said the 2017 yields were down by 5.0% on-year and this had pushed load factor up by 1.0ppt on-year to a respectable 80.0%. It is clear that management was lowering ticket price in order to fill up the aircraft.
“Management plans to launch six to seven new routes to Japan and China in 2018. In addition it will fine tune its fleet capacity by reducing capacity during some sector’s weak period and redeploy the capacity to other routes.
“There will be a total of six new aircraft deployment, of which three aircraft will be deployed to the Malaysia and Thai operations. This will be AAX’s maiden aircraft acquisition for the past two years,” said Maybank Research.
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