To recap, AirAsia X’s ancillary income per pax in 1H16 had seen further improvements by five per cent to RM140.20 per pax as compared to RM133.70 per pax in 1H15.
KUCHING: AirAsia X Bhd (AAX) is expected to record a strong fourth quarter of 2016 (4Q16) backed by higher yields and load factors as a result of year-end holiday season.
Kenanga Investment Bank Bhd’s research arm, Kenanga Research, in a report, noted that since its listing back in July 2013, AAX registered losses for the longest time until FY15 due to several reasons.
These include overexpansion, over-capacity in the market, aggressive price war from MAS, especially on Australian route, high fuel cost environment, and MH370 incident in March 2014, which negatively impacted on the China route.
“However, as they moved into FY16, they managed to rake in a core net profit (CNP) of RM107.3 million in the first half of 2016 (1H16).
“This was premised on several factors such as yield improvements as a result of rationalisation of the market competition, improved load factor of 79 per cent on the back of higher capacity due to well managed capacity and routes optimisation, the return of Chinese tourists, and low fuel cost environment.
“Going forward, we believe that AirAsia X will be able to replicate its 1H16 performance as they move into 2H16 and also FY17 premised on the factors above,” it commented.
On a quarterly basis, Kenanga Research noted that the second quarter (2Q) and 3Q are seasonally weaker quarters.
“This is because these two quarters command higher yields and ancillary revenue per pax coupled with higher load factors.
“As such, we are projecting CNP of RM13.4 million for 3Q16 in view of a weaker season, while RM105.3 million for 4Q16 that is backed by higher yields and load factors as a result of holiday season.
“This would effectively bring our full-year projection for FY16 to RM223.8 million which we believe is highly achievable given that AirAsia X achieved higher forward bookings in 2H16 by three to five per cent as compared to 2H16 previously,” it explained.
For the year ahead, the research team foresee a better performance for FY17, underpinned by low-fuel cost.
“That said, as there is no further capacity expansion for FY17 as most of the aircraft deliveries will resume from FY18 onwards, management is determined and focused in further enhancing its overall yields and load factors by increasing frequency to the North Asia route, further improvements in ancillary income through the introduction of premium lounge, making Tune Insurance and in-flight entertainment available in all markets,” it said.
To recap, AirAsia X’s ancillary income per pax in 1H16 had seen further improvements by five per cent to RM140.20 per pax as compared to RM133.70 per pax in 1H15, it added.
“Hence, we are projecting 22 per cent growth in CNP of RM275.9 million, with an assumed overall yield of 18.4 sen per revenue per kilometre (RPK) and an average fuel cost assumption of US$64 per barrel.
“We are not concerned over the new PSC charges given that AirAsia X had proven to be able to raise their average fare by RM88 per pax in 1H16, while charting an impressive passenger growth of 21 per cent, y-o-y,” it said.
Overall, Kenanga Research pegged a ‘trading buy’ call on the stock, premised on its turnaround story and undemanding valuation.