KUALA LUMPUR: CIMB Equities Research expects significantly weaker performance for the rest of the year for long-haul low-cost carrier AirAsia X
due to higher oil prices, with FY18F estimated to be loss-making.
The research house said on Wednesday that based on prior-year quarterly trends, AAX’s 1Q18 core net profit (CNP) of RM91mil was 30% more than its previous full-year forecast.
While Malaysia AirAsia X (MAAX) reported in-line CNP, Thai AirAsia X’s (TAAX) CNP was 80% more than expected due to strong inbound tourist arrivals into Thailand.
“We downgrade our call from Hold to Reduce and lower target price to 29 sen, based on a lower CY18F P/BV multiple of 1.3 times (one standard deviation below mean), from 1.5 times previously,” it said.
CIMB Research raised its spot jet fuel price assumption from US$75/bbl to US$85/bbl for all forecast years; jet fuel is trading at US$88/bbl currently.
With a light hedge of only 12% at US$68/bbl, AAX is caught unprepared. AAX also does not have a fuel surcharge mechanism in place, it said.
“Separately, MAHB is entitled to collect RM73/pax airport tax from Feb 1 but AAX is still collecting only RM50/pax. AAX is on the hook for the remaining RM23/pax or c.RM50m up to May 31, which we have factored into our FY18F forecasts,” it said.
CIMB Research said MAAX reported CNP of RM36.8m, up RM8.3m on-year (+29%) due to a lower net interest expense position as the net debt balance was cut on loan installment repayments.
MAAX’s EBIT was merely flat on-year while cargo revenue grew and ASK capacity expansion of 10% was well absorbed without any load factor or yield dilution. Operating costs rose at a faster rate of 13% on-year due to the 33% on-year rise in fuel prices to US$88/bbl, partially offset by the 12% depreciation of the US$.
TAAX was the star of the show, growing 1Q18 CNP by 151% on-year. AAX’s 49% share of TAAX's 1Q18 CNP amounted to RM47.7m, up 151% on-year from RM19m in 1Q17.
Passengers carried rose 19% on-year as inbound tourist arrivals into Thailand rose 15% on-year. TAAX grew its ASK capacity 19% on-year and kept its load factor unchanged at 94%.
On top of that, TAAX managed a 25% on-year rise in average base fares to US$163/pax in 1Q18 from US$130/pax in 1Q17.
Indonesia AirAsia X (IAAX) reported a breakeven CNP in 1Q18, against RM31m losses in 1Q17 as it relaunched services since 2Q17 on two routes, Bali-Mumbai and Bali-Tokyo Narita. The 1Q18 performance was commendable given that one of its two A330s had been sent for scheduled maintenance.
MAAX currently has 22 A330s and plans to add two to three more planes this year via operating leases, with all-economy seats.
“Given its excellent performance, TAAX plans to take delivery of three to four more operating lease planes (all-economy seats) to add to its current fleet of six A330s.
TAAX launched Don Mueang-Sapporo in April and more North Asia route launches are expected throughout the year.
As for IAAX, it cancelled its Bali-Mumbai route in May, presumably due to route underperformance, replacing it with Jakarta-Tokyo Narita, and its fleet of two A330s will remain unchanged.