KUCHING: AirAsia Bhd (AirAsia) is likely to see its yields under pressure underpinned by the increase in competition from its aviation counterpart; Malindo Air (Malindo).
Analyst Ahmad Maghfur Usman of RHB Research Institute Sdn Bhd (RHB Research) highlighted this in a report yesterday, adding that this was despite positive expectations of the airline’s first half of the financial year (1HFY13) earnings results.
The analyst further outlined that AirAsia is expected to record satisfactory numbers while its second quarter FY13 (2QFY13) earnings are likely to inch higher by three per cent quarter-on-quarter (q-o-q) and five per cent year-on-year (y-o-y) on the back of revenue growth of four and 10 per cent, respectively.
“The main highlight to watch for is how AirAsia yields will fair due to Malindo’s emergence in the domestic low cost carrier space.
“We expect yields to start seeing pressure – dropping by four per cent – although this will be offset by higher ancillary revenue per pax, thus narrowing the drop in overall FY13 yields to two per cent.
“However we expect the yields downside to be mitigated by higher associate profits and lower fuel costs, as jet fuel came in lower y-o-y and q-o-q by seven and 10 per cent, respectively,” Ahmad Maghfur explained.
Nevertheless, he pointed out that despite competition from Malindo – which commenced operations in late March – AirAsia continues to report passenger numbers growth in 2QFY13.
The analyst explained, “Revenue passenger kilometre (RPK) grew (an increase of 5.6 per cent q-o-q; and increase of 12.7 per cent y-o-y) while maintaining its number of aircraft at 66, thus giving boost to its load factor to 79.9 per cent (78.5 per cent previously).
“Year to date, 1HFY13 RPK accounted for 48 per cent our FY13 estimate, which is deemed within expectations.”
Additionally, AirAsia’s 2QFY13 growth, the analyst noted, was attributed to higher flight frequency to Kuching, Bintulu and Langkawi on the domestic side, and Kuala Lumpur to Tiruchirappalli (India) and Lombok (Indonesia) internationally.
RHB Research retained AirAsia’s fair value at RM3.94 per share, premised at 13-fold FY14 forcast price earnings, which is the average peers multiple. Ahmad Maghfur added the listing of associate Indonesia AirAsia sometime in 4Q 2013 or 1Q 2014 will also crystallise valuations.