This article first appeared in The Edge Financial Daily on May 2, 2019

AirAsia X Bhd
(April 30, 23.5 sen)
Retain neutral with a target price (TP) of 23 sen: During the first quarter of 2019 (1QFY19), the number of passengers carried by the Malaysian operation (MAAX) fell 4.8% year-on-year (y-o-y) to 1.51 million, as its available seats per kilometre (ASK) growth dropped 4.5% y-o-y to 8.7 billion. Passenger load declined by 0.5 percentage points (ppts) to 83.3%, compared to 83.8% in 1QFY18. The number of passengers carried was below our expectation at only 20% of our full-year forecast. Meanwhile, its ASK accounted for only 18% of our forecast. No aircraft was added during the quarter. MAAX launched its new Taipei-Osaka route in January 2019 followed by Kuala Lumpur-Fukuoka in February. MAAX also has realigned its capacity on selected routes, such as Taipei, Gold Coast, Perth and Sydney to improve its yield.

Thailand AAX (TAAX) passenger load remained strong at 90% in 1QFY19, versus 94% in 1QFY18. No new routes were introduced during the quarter, but TAAX added one aircraft, bringing its fleet size to 10 aircraft. As at March 2019, TAAX has expanded its route network to six from four in 1QFY18.

Meanwhile, Indonesia AAX (IAAX) served its final scheduled flight from Bali to Tokyo in January 2019. IAAX will be operated on a non-scheduled flight basis moving forward. Its fleet size remained at two during the quarter.

The TP is based on 10 times FY19 forecast earnings per share. AAX is scheduled to release its 1QFY19 results and passenger yield data this month. — PublicInvest Research, April 30